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.


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




Sharpe Ratio

Standard Deviation of Returns


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