What do the headers mean in the “Key Statistics” chart?
Alpha is a measure of the performance of the model relative to its market risk (beta) and is the regression intercept. It is calculated by taking the model’s excess returns (total return less the 13 week T-bill return over the period) and subtracting from it the model’s expected return given its Beta. The model’s expected return is given by the Beta multiplied by the market risk premium, which is the S&P 500 return less the 13 week T-bill return over the period. A higher alpha is considered desirable. Beta is a measure of relative risk and is the regression of the slope. It is a measure of the market risk that the model experiences. It is found by regressing the model’s weekly returns and the S&P 500’s weekly returns. Correlation is a measure of similarity of results. Maximum Draw-down can be loosely defined as the largest drop from a peak to a bottom in a certain time period. Sharpe Ratio is the risk adjusted return and is the return less the risk free rate (the 3 year average of the
