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sharpely offers a first-of-its-kind MF/ETF alpha analysis tool available to investors. With over 50 metrics for in-depth comparison, the sharpely MF/ETF alpha analysis tool is your one-stop shop for analyzing and comparing funds with different benchmarks.
Next, we provide you with a detailed guide so that you can use the sharpely MF/ETF alpha analysis tool to its full potential.
Before we move on to the alpha analysis user guide, it is important to understand what alpha analysis is.
As we know, alpha is nothing but the excess returns generated by the asset over its expected returns. In the case of MF and ETFs, benchmark returns are considered as expected returns.
So, for MF/ETF alpha is nothing but the excess returns generated by the MF/ETF compared to its benchmark.
All investors generally check alpha before investing in any MF/ETF. But you can’t compare the alpha of all the funds in a particular category with respect to a chosen benchmark.
Using the alpha analysis tool of sharpely, you can now compare the alpha of all the mutual funds in a category with the benchmark of your choice over a particular time frame.
Investors can use alpha analysis for various purposes.
This way you can perform inter and intra-category comparisons of MFs/ETFs.
Now we will explain the use of the MF/ETF alpha analysis tool using a simple example.
Let’s take an example to understand the working of the MF/ETF alpha analysis tool.
Suppose an investor wants to compare year to date (CY) performance of small-cap equity mutual funds with respect to the large-cap index.
They can use the alpha analysis tool to perform this analysis. We have shown the snips of the MF alpha analysis tool. Now we will provide the required data in three steps.
We will select the MF/ETF category. As we want to perform an alpha analysis of small-cap funds, we will select equity: small cap category.
You can choose from more than 40 categories of mutual funds. We follow the value research categorization of mutual funds. You can find more details about it .
In this step, we will select the benchmark. As we are doing alpha analysis with respect to the large-cap category, our preferred benchmark will be Nifty 50 TRI. We will select the same in the benchmark tab.
In this step, we will provide the start date and end date. As we want to perform YTD alpha analysis, our starting date will be 15/1/2024 and the end date will be 15/1/25 (at the time of writing this).
Here the minimum time period required for alpha analysis is 3 months. If you start less than 90 days before the current date, you will not be able to perform alpha analysis. Once you select the time period, you can hit the check button.
Once you hit the check button, you will be able to see the results. Starting and ending date for each fund is mentioned. This can help if we select a very long time period for analysis and the fund inception date is after our start date. Exact start and end dates provide the exact period information.
You can see the alpha of each fund with respect to the chosen benchmark. You can also see the beta and R2 value of the funds along with AUM, fund return, and benchmark return. Using these parameters, you can perform an in-depth comparison of all the mutual funds in a category.
Note: R2 value explains how well the independent variable can explain the movement of the dependent variable. So higher the R2 value, the better the predictability of the dependent variable. In our case, the dependent variable is fund return and the independent variable is benchmark return.
You can also download this data and check the Heatmap for this list.
That’s it, folks! Now you have a complete understanding of the MF/ETF alpha analysis tool. We hope that by using this tool you will be able to compare the funds with different benchmarks and make informed investment decisions.