Glossary of Terms
BetaBeta attempts to measure relative risk. A Beta rating above 1.0 indicates greater volatility than the market. A Beta rating below 1.0 indicates lower volatility than the market.
Standard DeviationA statistical measurement showing how widely returns varied over a certain period of time. For the characteristics, the period is twelve months. For the chart the period is since inception. When a fund has a high standard deviation, the predicted range of performance implies greater volatility.
Market CapitalizationThe measurement of the total dollar market value of all of a company’s outstanding shares.
Price/EarningsAn equity valuation measure defined as market price per share divided by annual earnings per share.
Price/Cash FlowA measure of the market’s expectations of a firm’s future financial health. Because this measure deals with cash flows, the effects of depreciation and other non-cash factors are removed.
Price/BookA ratio used to compare a stock market value to its book value. It is calculated by dividing the current closing price by the latest quarter’s book value per share.
Price/SalesA valuation metric for equities. It is calculated by dividing the company’s market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock price by the per-share revenue.
Enterprise Value/SalesA valuation metric for equities. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company's balance sheet. This is then divided by the revenue in the most recent year.
Return on EquityThe amount of net income returned as a percentage of shareholders‘ equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. Return on Equity = Net Income/Shareholders’ Equity
Return/RiskA measure of risk adjusted performance that is often compared to a benchmark. The formula is the annualized return divided by the annualized standard deviation.
Tracking ErrorThe annualized standard deviation of the excess returns of a strategy and its benchmark. It is a measure of how closely a strategy is performing relative to its benchmark.
R-SquaredA statistical measure that represents the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model. It can also by computed by squaring the correlation between the strategy and the benchmark.
AlphaA risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return.
MSCI All-Country World Index (ACWI)®A free-float weighted equity index. It captures Large and Mid-Capitalization representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. It is not possible to invest directly in an index.
Russell 2000® IndexConsists of the smallest 2,000 companies in a group of 3,000 U.S. companies in the Russell 3000® Index, as ranked by market capitalization. It is not possible to invest directly in an index.
S&P 500Widely regarded as the best single gauge of large cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. It is not possible to invest directly in an index.
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