Alpha aur beta 2 aise shabd hain jo regular conversations mein bhi use hote hain. In regular life, the meaning of alpha and beta is very different from their mathematical meanings. Koi insan leadership qualities dikhata hai, to usse Alpha Maana jata hai. Aur jo Insan bahar ke trends ko blindly follow Karta hai, aur khud ke do pairo par khada nahin Ho pata, usse beta kaha jata hai.
Biology mein bhi Alpha male aur beta male jaise terms use hote Hain. Stock market ke Alpha aur beta ko samajhne ke liye aap yah sab matlab bhool jayege. In the stock market, the terms alpha and beta are simply used as measurements to better understand particular features of a stock.
Both alpha and beta are purely numbers.
Let's start our discussion with understanding the meaning behind Alpha in financial markets. Certain investors are happy to get market-based returns. These investors put their money in mutual funds which track the market movements. Par jab koi market based returns kehta hai toh uska exact meaning kya hai?
To understand this, we will need to discuss the concept of benchmark indices. Benchmark indices are simply financial contracts such as Nifty 50. Nifty 50 is the weighted average of companies on the National stock exchange with the highest market capitalisation. Market capitalisation is the multiplication of a company's outstanding shares and the current market price of its stocks. Simple bhasha mein kahin to market capitalisation aapko yah Bata deta hai ki koi company kitni badi hai.
Therefore, Nifty 50 tracks the movement of the 50 biggest companies on the index. If Nifty goes up, then it can be said that the general market is also going up. If Nifty 50 goes down, then the general market also trends downward.
Sometimes, investors may want to get returns which are greater than those they can get on a benchmark index. These investors will curate their own portfolio. They will pick stocks which they believe will beat the performance of the stocks in the benchmark index. If their portfolio grows at 10%, and the relevant benchmark index grows by 5%, then their portfolio is said to have an Alpha value of positive 5. Therefore the Alpha value of any portfolio is simply obtained by subtracting the rate at which the general index grew from the rate at which that particular portfolio grew.
Positive Alpha value ka yah matlab nahin hota ki aapne profits kamae. Maan lijiye ki general market mein 10% contraction hua hai. In comparison, your portfolio only contracted by 3%. In such a case you will have a positive Alpha value of 7. So even though you did make losses you did not lose as much as the general market did.
Alpha ka base value zero hota hai. If a portfolio has an Alpha value of zero then that means it is growing and shrinking in lockstep with the general index. Sometimes, portfolios also have a negative Alpha value. This means that that particular portfolio isn't performing as well as the benchmark index. A negative Alpha value is always a bad thing. Interestingly, that is not always the case with a negative beta value.
Let's now turn our discussion to the meaning and implications of beta in the financial markets. While Alpha measures the performance of a particular portfolio in the light of the benchmark index’s performance, the beta number measures a particular stock’s or portfolio’s volatility.
Beta ka base value one hota hai. Agar koi stock ka beta value 1 hai, then that means it is just as volatile as the benchmark index. If a particular stock has a beta value of less than 1, then that means that stock is less volatile than the general market. Conversely, agar koi stock ya portfolio ka beta value 1 se zyada hai, then that means that stock or portfolio has seen more ups and downs than the general market.
A lower beta value will suit conservative investors. Stocks with a beta value of less than one fluctuate less often than the general market. At least we can say with certainty that they fluctuated less often historically - so that can be taken as a marker for their future behaviour as well.
On the other hand, stocks with a beta value over one will suit investors who like to take risks. Greater fluctuation always means an opportunity for making greater profits by entering a position when the stock is trading at a low value and exiting the position when the stock is trading at a much higher value.
Certain industries tend to have lower beta values in general. Utility companies - that is, companies that make basic necessities like electricity, vehicle fuels et cetera - tend to have a beta value of less than one. Even in times of crisis, people do not stop consuming these commodities.
Tech companies, on the other hand, tend to have a beta value of more than one.
In general, tech companies zyada young hoti hai and therefore they don't operate from a stable base. They may expand very aggressively. They may also contract very quickly. Unke business models zyada untested hote Hain. Aisi companies par investors ka confidence waiver karta rahata hai aur unke ke sath company ka beta value bhi waiver karta hai.
At the end of the day, it is important to remember that both the alpha and beta values are historical values. A portfolio with a high Alpha number outperformed the benchmark index in the past but it may not continue to do so in the future. A stock with a lower beta value has been less volatile than the general market in the past, but it can become more volatile in the future if conditions change.
And conditions are always changing. Therefore, investors must also look at other metrics while choosing the stocks that they want to invest in.
चलिए, एंजेल वन की तरफ से आपको आज के अलविदा. ये podcast शेयर करना ना भूलियेगा - याद रखियेगा की ज्ञान बाटने से बढ़ता है । और फिर अंत में तोह financial markets एक ऐसी university है जिसमे कोई professor नहीं, सब students ही है ।