Asymmetric Alpha

Asymmetric is an imbalance, or unequal. Asymmetric returns. for example, is an asymmetric risk/reward profile: one that is imbalanced or skewed toward the upside than the downside. Investors prefer to capture more of the upside, less of the downside.

Alpha is the excess return of the fund relative to the return of the benchmark index or an abnormal rate of return. The term alpha was derived from the academic theory of “The Capital Asset Pricing Model (CAPM).

The two terms, asymmetric and alpha, are very different and probably should not be used together.

The first is about absolute returns.

The latter is about relative returns.

So, I believe we have to pick one of the others, rather than use them together.

For information about the application of absolute and asymmetric returns visit ASYMMETRY® Managed Portfolios by Shell Capital Management, LLC.

Asymmetric Alpha defined

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