Active Risk
Definition
What is Active Risk?
The volatilityThe degree and frequency of price or return fluctuations. of a portfolioThe complete collection of investments owned by an investor or managed under one mandate.'s active returnThe difference between a portfolio's return and its benchmark's return., also called tracking errorThe variability of the difference between a fund's return and its benchmark return..
Example in practice
How This Looks in Practice
Large benchmarkA reference index or rate used to evaluate a fund's performance. deviations create higher active risk.
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Related Terms
Correlation
A statistic ranging from minus one to plus one that describes how two return series move together.
Portfolio AnalyticsPositive Correlation
A relationship in which two assets tend to move in the same direction.
Portfolio AnalyticsNegative Correlation
A relationship in which two assets tend to move in opposite directions.
Risk ManagementStress Test
An analysis of portfolio performance under severe but plausible scenarios.