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The Morningstar Dictionary: R-Squared

This TMP measure helps gauge the relevance of the benchmark used to calculate Alpha and Beta.

Wendy Stein: R-squared is one of the Modern Portfolio Theory statistics reported by Morningstar. R-squared, along with the other MPT statistics, can help investors assess the risk-return profile of investments. You can find them in the Risk section of a fund or ETF’s Morningstar Report on Morningstar.ca.

R-squared, together with alpha and beta, provide a snapshot of a fund’s returns versus the return of a benchmark index. Without getting into the math, R-squared measures the strength of the relationship between a fund’s performance and a benchmark’s performance, specifically, the degree to which a fund's performance can be explained by the performance of the benchmark.

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