r-squared

Definition

A measurement of how closely a portfolio's performance correlates with the performance of a benchmark index, such as the S&P 500, and thus a measurement of what portion of its performance can be explained by the performance of the overall market or index. Values for r-squared range from 0 to 1, where 0 indicates no correlation and 1 indicates perfect correlation.

Use r-squared in a sentence

You may want to do some research on how the r-squared plays in to how well a product does in the long term.

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You should try and figure out what a good target r-squared would be and always shoot to attain it if you can.

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Warren Buffett always explains to shareholders that they should evaluate his performance by comparing his company to the S&P 500 in an r-squared evaluation.

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