How do alpha and beta affect the performance of cryptocurrencies in investment portfolios?

Can you explain how the concepts of alpha and beta impact the overall performance of cryptocurrencies in investment portfolios? What are the specific ways in which these factors influence the returns and risk associated with investing in cryptocurrencies?

1 answers
- When it comes to the performance of cryptocurrencies in investment portfolios, alpha and beta are essential factors to consider. Alpha represents the excess return of a cryptocurrency compared to a benchmark, such as the overall market or a specific index. A positive alpha indicates that the cryptocurrency has outperformed the benchmark, while a negative alpha suggests underperformance. Beta, on the other hand, measures the volatility of a cryptocurrency relative to the benchmark. A beta greater than 1 indicates higher volatility, while a beta less than 1 suggests lower volatility. Understanding the alpha and beta of cryptocurrencies can help investors assess the risk and return potential of their portfolios, and make informed decisions about asset allocation and diversification strategies.
Mar 06, 2022 · 3 years ago
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