Apple Inc has current Jensen Alpha of 0.1505. Jensen alpha is a measure of the returns that are attributable to the managers ability to select security and time the market. In other words it is the returns remaining after deducting what would have been attributable to beta returns (which do not require skill) and the risk free rate.
| = |
ER[a] - RFR * (1-BETA)
BETA * ER[b])
| = |
|ER[a]|| = || Expected return on investing in Apple|
|ER[b]|| = || Expected return on market index or selected benchmark|
|BETA|| = || Beta coefficient between Apple and the market|
|RFR|| = || Risk Free Rate of return. Typically T-Bill Rate|
Jensen Alpha Comparison
Apple Inc is rated fourth
in jensen alpha category among related companies. It is rated below average
in maximum drawdown category among related companies reporting about 10.18
of Maximum Drawdown per Jensen Alpha. The ratio of Maximum Drawdown to Jensen Alpha for Apple Inc is roughly 10.18
Jensen alpha is the difference between the return of the portfolio, and what the portfolio should theoretically have earned. Any portfolio can be expected to earn the risk free rate (RF), plus the market risk premium (which is given by [Beta x (Market Portfolio Return - Risk Free Rate)]. Anything remaining over and above is alpha.