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Investors use the metrics alpha and beta to assess the performance and risk of a portfolio or investment asset. Market risk is quantified by beta, while alpha informs investors of investments whose returns are higher than those predicted by their beta.

Alpha shows investors how an investment is carried out compared to a benchmark (for example, the S&P 500 index) after it’s tuned to its risk, as counted by beta. For instance, a positive alpha shows an investor that the performance of his portfolio is higher than what its beta would predict.

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