Alpha

Alpha is the measure of an investment’s performance compared to a certain benchmark. The excess return of the portfolio over the benchmark index is the portfolio’s alpha. If alpha is positive the investment has outperformed its benchmark. Similarly, if it is negative then the portfolio has underperformed. An alpha of 0 would indicate that the portfolio is following the benchmark perfectly.

For example, an alpha of 1 means the fund has outperformed the returns of the benchmark index by 1% and an alpha of -1 means the fund underperformed by 1%.