Glossary

Alpha

Alpha is the excess return of a fund relative to the return of a benchmark index.

Financial assets allocation

A portfolio's apportioning between different parts represented as asset classes (equity, bonds, convertible bonds, currencies, cash, other investments...) depending on an investor's budget constraints, risk tolerance and investment horizon.

PER

The PER (Price to earnings ratio) refers to a ratio used for company's valuation and measuring its current share price relative to its earnings per-share (EPS). As its name suggests, the PER can be calculated by dividing the current market value per share by the earnings per share of the company :

PER = Market Value per Share/ Earnings per Share (EPS)

Information ratio

The information ratio is a measure of the risk-adjusted return of a financial security or portfolio. It is defined as the excess returns relative to a benchmark index (alpha) divided by the tracking error. The tracking error is the standard deviation of the active returns. 

Sharpe ratio

The Sharpe ratio measures the returns' difference between an investment fund or a financial assets portfolio and the rate of return of a risk-free investment (EONIA), divided by the volatility.   

Tracking error

The tracking error measures the standard deviation of the difference between a portfolio's returns and the returns of the index to which it is benchmarked.

Volatility

Volatility is a standard deviation measure of the dispersion of a given financial asset's returns. It is used for quantifying  the amount of uncertainty or risk about the size of changes in a financial asset's value.

The historical volatility does not predict the future volatility, however the informations highlighted by volatility are too important to be omitted by investors.