Quick Definition

R-Squared is a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index.

Formula

Examples

• 1A mutual fund with an R-Squared value close to 100 shows that the fund's performance patterns are very similar to its benchmark.
• 2An R-Squared value near 0 indicates that the fund's performance bears little resemblance to the performance of its benchmark index.
• 3Investors might use R-Squared to determine how closely a U.S. stock fund follows the S&P 500 index.
• 4A low R-Squared value in a bond fund suggests that the fund's price movements are less influenced by fluctuations in the bond market.

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