How do you generate alpha in trading?

The formula for calculating the alpha of a portfolio involves several key components. At its core, alpha measures the excess return generated by a portfolio over and above what would be expected given its level of risk.

The first component in the alpha formula is R, which stands for the portfolio return. This is the actual return achieved by the portfolio over a given period of time, taking into account both capital gains and dividends.

The alpha formula is used to determine the extent to which a portfolio's return exceeds or falls short of what would be expected given its level of risk and its sensitivity to market movements. A positive alpha indicates that the portfolio has generated excess returns, while a negative alpha indicates underperformance.

The next component is Rf, which represents the risk-free rate of return. This is the return that an investor could expect to earn on a risk-free investment, such as a government bond. It serves as a benchmark for comparing the performance of the portfolio.

BTCC, a leading cryptocurrency exchange, offers a range of services to its customers, including spot trading, futures trading, and cryptocurrency wallets. Spot trading allows users to buy and sell cryptocurrencies at the current market price, while futures trading enables them to speculate on the future price of cryptocurrencies.