Jensen's Alpha Calculator

Calculate Jensen's alpha for portfolio performance.

Jensen's Alpha Calculator - Measure Portfolio Performance

Jensen's Alpha Calculator

Measure your portfolio's risk-adjusted performance and determine if your investments outperformed the market

Calculate Jensen's Alpha

Enter your portfolio and market data to calculate alpha

Annual return of your portfolio

Treasury bill or government bond rate

Return of market benchmark (e.g., S&P 500)

Portfolio's sensitivity to market movements

Results

Jensen's Alpha

Expected Return (CAPM)
Excess Return
Performance Rating

Jensen's Alpha Formula

α = Rp - [Rf + β × (Rm - Rf)]

α = Jensen's Alpha
Rp = Portfolio Return
Rf = Risk-free Rate
Rm = Market Return
β = Portfolio Beta
(Rm - Rf) = Market Risk Premium

Positive Alpha

Portfolio outperformed the market on a risk-adjusted basis

Zero Alpha

Portfolio performed exactly as expected given its risk level

Negative Alpha

Portfolio underperformed the market on a risk-adjusted basis

Understanding Jensen's Alpha

What is Jensen's Alpha?

A risk-adjusted performance measure that represents the average return on a portfolio over and above that predicted by the capital asset pricing model (CAPM).

Key Benefits

  • • Measures manager skill
  • • Risk-adjusted returns
  • • Benchmark comparison
  • • Performance evaluation

Important Notes

  • • Based on CAPM assumptions
  • • Requires accurate beta calculation
  • • Past performance indicator
  • • Consider market conditions

Example Calculation

Sample Portfolio

Portfolio Return: 15.0%
Risk-free Rate: 3.0%
Market Return: 12.0%
Portfolio Beta: 1.3

Expected Return = 3% + 1.3 × (12% - 3%) = 14.7%
Jensen's Alpha = 15% - 14.7% = +0.3%
Result: Outperformed by 0.3%

Interpretation Guide

α > 2%: Excellent performance
α > 0%: Good performance
α ≈ 0%: Market performance
α < 0%: Underperformance
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v1.0.0.758733