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Alpha

Alpha indicator represents the distinction between a mutual fund's actual performance and the expected performance based on the risk level taken by the fund's manager. Alpha indicator measures the residual risk which an investor afterwards uses as a result of investing in a fund rather than in a market index. The fund is considered to have an Alpha of zero if a fund produced the expected return for the level of supposed risk.

Alpha = [ (sum of y) - {b * (sum of x)} / n ]:

n - number of observations
b - Beta of the fund
x - rate of return for the benchmark index (often, but not always, the S&P 500)
y - rate of return for the fund

A negative Alpha demonstrates that the manager didn't succeed in rewarding investors sufficiently for the risks they take. A positive Alpha demonstrates a return bigger than it was supposed for the taken level of risk. On the whole, the Alpha-Beta Trend Channel study uses the standard deviation of price variation to build 2 trend lines. One is higher and one is lower than the changing average price field. This creates a channel, or a band, where the biggest part of price field values is happening.