Understanding Risk Measurement: No single metric captures all dimensions of portfolio risk. Each measure provides a different perspective, and together they create a comprehensive picture of portfolio characteristics.
Risk-Adjusted Performance
Metrics that evaluate returns relative to risk taken.Alpha
Excess returns vs. benchmark - measures value added beyond market movements
Sharpe Ratio
Return per unit of total risk - the gold standard for risk-adjusted performance
Information Ratio
Active return efficiency - measures consistency of benchmark outperformance
Treynor Ratio
Return per unit of systematic risk - best for well-diversified portfolios
Risk & Volatility Measures
Quantifying uncertainty and downside potential.Beta
Market sensitivity - how much your portfolio moves with the market
Standard Deviation
Return dispersion - measures how much returns jump around
Correlation
Asset co-movement - whether investments move together or independently
Drawdown
Peak-to-trough losses - the worst decline you’d experience
Portfolio Construction
Building and managing portfolios.Diversification
The only free lunch in investing - reducing risk through variety
Factor Investing
Systematic approaches targeting proven return drivers
Market Capitalization
Company size measurement and why it matters
Portfolio Rebalancing
Maintaining target allocations over time
Investment Strategies
Approaches to selecting securities.Momentum
Riding trends - recent winners tend to keep winning
Value Investing
Buying stocks for less than they are worth
Volatility
Price fluctuations and market uncertainty
Risk-Adjusted Returns
Evaluating performance relative to risk taken
Advanced Analytics
Sophisticated portfolio analysis techniques.Tracking Error
How closely a portfolio follows its benchmark
Hit Ratio
Frequency of benchmark outperformance
Information Coefficient
Measuring forecasting skill
Style Analysis R-Squared
How much factors explain returns
Factor-Adjusted Alpha
True skill after removing factor exposures
Fundamentals
Core investment concepts.Return
Measuring investment gains and losses
Benchmark
Standards for measuring performance
Asset Allocation
Dividing your portfolio among asset classes
Investment Approaches
Systematic and quantitative methods.Quantitative Investing
Data-driven, systematic investment approaches
Systematic Strategy
Rules-based approaches to investing
Islamic Finance
Shariah-compliant investing principles and terminology.Shariah
Islamic law framework governing permissible investments
Halal Investing
Investments that comply with Islamic principles
Riba
Prohibition on interest and usury
Purification
Cleansing non-compliant income through charity
Explore each term to understand both the intuitive meaning and the technical details behind these essential investment concepts.