Alpha

Alpha measures how much a stock or portfolio's return has beaten, or lagged, what its market risk alone would predict, given its beta. A positive alpha means the investment outperformed once its risk is accounted for, a negative alpha means it underperformed, and an alpha of zero means the return was exactly what its market risk would explain, no more and no less.

Alpha is the number active investors and fund managers are ultimately judged on, since anyone can capture the market's own return simply by holding an index fund. Genuine skill, by this measure, means producing returns above what beta alone would explain, rather than returns that just came from taking on more market risk. In practice alpha is hard to sustain over long periods, most professional fund managers fail to generate positive alpha consistently after fees, which is part of the case often made for low cost index investing over active stock picking.