What insights can be gained from the 3-year risk analysis of the Fund, Category, and Index?
The risk analysis provides insights into the performance and risk measures of the Fund, Category, and Index over a 3-year period. The Fund has shown a lower standard deviation, indicating relatively lower volatility compared to the Category and Index. Its positive Sharpe Ratio suggests that it has generated a satisfactory risk-adjusted return. The moderate R-Squared value indicates a reasonable correlation with the Index, implying that a significant portion of the Fund's returns can be attributed to market movements. With a Beta below 1, the Fund has exhibited lower volatility than the overall market. However, the Fund has not outperformed or underperformed relative to its Beta, as indicated by its Alpha of 0.
Standard Deviation
The standard deviation measures the dispersion of returns around the average return of an investment. In this case, the Fund's lower standard deviation compared to the Category and Index implies that the Fund's performance has been more stable over the 3-year period. Investors may prefer lower standard deviation as it indicates less volatility and risk.
Sharpe Ratio
The Sharpe Ratio is a measure of risk-adjusted return, considering the return generated by an investment relative to its risk. A positive Sharpe Ratio indicates that the Fund has generated higher returns per unit of risk taken compared to the risk-free rate. In this scenario, the Fund's Sharpe Ratio of 0.51 suggests that it has provided a satisfactory return relative to the risk it carries.
R-Squared
R-Squared measures the percentage of a fund's movements that can be explained by movements in its benchmark index. A moderate R-Squared value of 56.28 for the Fund implies that a reasonable portion of its performance can be attributed to market movements. Investors can use R-Squared to understand how closely a fund tracks its benchmark.
Beta
Beta reflects the volatility of a fund relative to the market. With a Beta of 0.63, below the benchmark of 1, the Fund has exhibited lower volatility than the overall market. A Beta below 1 indicates that the Fund is less volatile than the market, offering potential downside protection in times of market turbulence.
Alpha
Alpha measures the excess return of a fund compared to its expected return based on its level of risk as measured by Beta. An Alpha of 0 indicates that the Fund has neither outperformed nor underperformed relative to its Beta. While positive Alpha is desirable as it indicates outperformance, a neutral Alpha suggests that the Fund is in line with market expectations.
In conclusion, the 3-year risk analysis of the Fund, Category, and Index provides valuable insights into their performance and risk characteristics. Investors can use these measures to evaluate the risk-adjusted returns of the Fund relative to its peers and the broader market. It is essential to consider multiple risk measures and performance indicators to make informed investment decisions.