This Alpha Calculator will compute the value of alpha based on the Capital Asset Pricing Model. This CAPM-based approach will take the portfolio return, risk-free rate, beta, and market return, and calculate alpha from these elements:
Here is a snippet of the alpha calculator template:
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Capital Assets Pricing Model (CAPM)
The CAPM formula is expressed as follows:
r = Rf + beta (Rm – Rf) + Alpha
Alpha= R – Rf – beta (Rm-Rf)
R represents the portfolio return
Rf represents the risk-free rate of return
Beta represents the systemic risk of a portfolio
Rm represents the market return
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