R-Squared

R-Squared is a measure of how well the performance of an investment or
portfolio correlates with the performance of the benchmark. R-Squared is
similar to correlation, and can be used to
help determine the significance of alpha
and beta.

See the
Benchmark Dialog to specify which
benchmark to use. A benchmark
must be assigned before r-squared calculations can be made.

R-squared varies between 0 and 1.0, where 1.0 indicates the
investment/portfolio correlate perfectly with the benchmark performance.

#### Calculation Details:

When calculating the r-squared of an investment the simple monthly returns over
the specified comparison period are
calculated. The simple monthly return is:

Return = (End_price + Dist_per_share - Start_price) / Start_price

The returns for both the investment and benchmark are calculated. If
the comparison period is 5 years, there are 60 monthly returns for each the
investment and the benchmark. R-squared is calculated as the square of the
correlation of these returns. See
correlation for more specifics on the formula used.

The r-squared for a portfolio, asset type, goal, sector, or investment
type is determined by calculating returns from a weighted average of the
investments in that group. The weighting is based on the ending value.

#### Advanced:

Fund Manager can output the data points used in this calculation to a log
file. By default the logging feature is turned off. To turn it on,
create a new registry string value at:

HKEY_CURRENT_USER\Software\Beiley Software\Fund Manager\CurrentVersion\techanal

named "benchmarklog" and set it to a value of "1". The log file is
named "stats_log.txt", and will be located in your user's AppData\Roaming\Fund
Manager folder (usually a hidden folder). This log file is deleted upon exiting Fund Manager.

### See Also

Benchmark Dialog

Custom Report

Alpha

Correlation

Beta

Sharpe Ratio

Standard Deviation of Returns