Definitions of Risk Metrics

Information ratio measures a strategy’s excess returns relative to the index, divided by the volatility of those excess returns.

Sharpe ratio divides a strategy’s gross return in excess of the 90-day Treasury bill by the strategy‘s standard deviation.

Beta measures the strategy’s volatility relative to its benchmark; a beta of 1.00 indicates that the strategy is as volatile as its benchmark.

R-squared indicates the percentage of the strategy’s movement that is explained by its benchmark’s movement, with a range of 0.00 to 1.00.

The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean.

Active share measures the percentage of holdings that differ from the benchmark, calculated by summing the absolute values of differences between portfolio weightings and benchmark weightings, dividing the value by two.