What is an alpha ???

A mathematical estimate of the return to be expected from a particular stock based on such things as the rate of growth of the company’s earnings per share. To measure the performance of a particular stock, it is assumed that the return from the market as a whole is zero. So, for example, a stock with an alpha of 1.25 would be expected to rise by 25% during a year in which the market remained flat. A share whose price is low compared with its alpha may therefore be considered good value. Alpha can also be applied to a portfolio of investments, to measure how well or badly it has done compared with how much risk it holds. A stock with a high alpha may or may not also have a high beta, a measure of its volatility.