Published 2026-10-25
Beta
Beta measures how much a strategy moves with the market. It is the part of a return that comes from market exposure rather than skill — which is why an alpha claim means nothing without it.
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What it is
Beta measures how much a strategy moves with the market. A beta of 1 means it moves with the market; 1.5 means it amplifies the moves; 0 means it is uncorrelated.
Why alpha needs it
Alpha is the return left over once market exposure is accounted for. A strategy with beta 1.2 that returned 15% in a year the market returned 15% has negative alpha — it took more risk to produce the same number.
This is the most common way a return gets flattered: calling it alpha without stating the beta behind it.
How to check
Ask what the market exposure was, over what window, and against which index. A return presented as alpha without a beta is a return presented without its main driver.