Consumer Staples: Essential products such as food, beverage, household goods, and feminine hygiene products, but the category also includes such items as alcohol and tobacco. These goods are those products that people are unable – or unwilling – to cut out of their budgets regardless of their financial situation.
Consumer discretionary: The term given to goods and services that are considered non-essential by consumers, but desirable if their available income is sufficient to purchase them. Consumer discretionary goods include durable goods, apparel, entertainment and leisure, and automobiles. The purchase of consumer discretionary goods is also influenced by the state of the economy, which can affect consumer confidence.
Alpha: A term used in investing to describe a Fund’s or strategy’s ability to beat the market, or it’s « edge. » Alpha is therefore also often referred to as “excess return” or “abnormal rate of return”. Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over a specific period.
Beta is a measure of the volatility, or systematic risk, of an individual stock or portfolio in comparison to the risk of the entire market. In statistical terms, beta represents the slope of the line through a regression of data points from an individual stock’s / portfolio’s returns against those of the market. A beta score of 1 therefore means that the stock’s / portfolio’s value tends to move inline with the market, whilst a beta score greater than 1 means the stock / portfolio is more volatile than the market and conversely that a beta of less than 1 means the stock / portfolio tends to be less volatile than the market.
Standard Deviation is a statistical measurement in finance that, when applied to the annual rate of return of an investment, sheds light on the historical volatility of that investment. The greater the standard deviation of securities, the greater the variance between each price and the mean, which shows a larger price range. For example, a volatile stock has a high standard deviation, while the deviation of a stable stock is usually lower
Sharpe Ratio is used to explain the return on an investment compared to the risk taken to generate said return. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.
Information Ratio (IR) is a measurement of portfolio returns beyond the returns of a benchmark, usually an index, compared to the volatility of those returns. The benchmark used is typically an index that represents the market or a particular sector or industry. The IR is often used as a measure of a portfolio manager’s level of skill and ability to generate excess returns relative to a benchmark, but it also attempts to identify the consistency of the performance by incorporating a tracking error, or standard deviation component into the calculation. Higher information ratios indicate a desired level of consistency, whereas low information ratios indicate the opposite.
Long exposure reflects investments in equity / fixed income instruments.
Gross exposure refers to the absolute level of a fund’s investments. It takes into account the value of both a fund’s long positions and short positions. Gross exposure is a measure that indicates total exposure to financial markets, thus providing an insight into the amount at risk that investors are taking on. The higher the gross exposure, the bigger the potential loss (or gain).