Understanding Standard Deviation and Alpha

Ratin Biswass / 04 Sep 2025/ Categories: DSIJ_Magazine_Web, DSIJMagazine_App, Letters to Editor, MF - Letter to Editor, Mutual Fund

I read your Mutual Fund Awards feature in the last edition.

I read your Mutual Fund Awards feature in the last edition. It was very insightful and has helped me take the first step in my mutual fund investment journey. Could you please explain the meaning of standard deviation and alpha as used in the analysis? - Swara Kulkarni [EasyDNNnews:PaidContentStart]

Editor Responds : Thank you for your kind words of encouragement. Standard deviation and alpha are two key metrics used to assess mutual fund performance. Standard deviation measures the fund’s volatility by showing how much its returns fluctuate compared to the average. A higher standard deviation indicates greater risk, while a lower one reflects more stability.

Alpha, on the other hand, evaluates the fund manager’s ability to generate returns over and above the benchmark. A positive alpha suggests superior performance, while a negative alpha indicates underperformance. Together, these metrics help investors judge both the consistency of returns and the value added by the fund manager’s decisions.

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

To read the entire article, you must be a DSIJ magazine subscriber.

[EasyDNNnews:UnPaidContentEnd]