Glossary

Alpha

The return a portfolio earns above what its market exposure alone would predict.

Beta

A measure of how much a stock or portfolio moves relative to the broader market.

Correlation

A measure of how closely two assets move together. The foundation of diversification.

Dividend yield

A stock’s annual dividend expressed as a percentage of its current price.

Drawdown

The peak-to-trough decline of a portfolio or position over a specific period.

Expense ratio

The annual fee charged by a fund or ETF, expressed as a percentage of assets.

GICS (Global Industry Classification Standard)

The sector taxonomy used by S&P and MSCI to classify companies by industry.

Market capitalization

The total dollar value of a company’s outstanding shares. The standard size category for stocks.

P/E ratio

The price-to-earnings ratio — how much investors pay for each dollar of company earnings.

Position concentration

The share of a portfolio held in a single equity position. A core dimension of structural risk.

Sector concentration

The share of a portfolio invested in a single industry sector.

Sharpe ratio

A measure of risk-adjusted return — how much excess return a portfolio earns per unit of volatility.

Standard deviation

The statistical measure underneath volatility. Quantifies how spread out returns are around the average.

Total return

The full return from an investment — price change plus dividends and distributions.

Volatility

A measure of how much an asset’s price fluctuates over time, usually expressed as standard deviation.