In finance, “alpha” refers to a measure of an investment’s performance relative to a benchmark index, such as the S&P500. An alpha portfolio is a collection of stocks (or all cash) that are expected to outperform the benchmark index and generate positive alpha for the investor.
There are three Alpha Portfolios that investors get access to, Large-Cap, Mid-Cap and Small-Cap. The specific characteristics of an alpha portfolio may vary depending on the investment category (Large-Cap, Mid-Cap or Small-Cap) and timing. For example, if the market is bullish then staying invested in good quality stocks that are outperforming the benchmark generates alpha. Similarly, if the market is bearish, then exiting stock investments and staying in cash generates alpha.
Alpha Portfolios employ three strategies to generate alpha for investors, they are – Timing, Selection and Allocation. The investment objective of Alpha Portfolios is to maximize returns while minimizing risk in comparison to benchmark.
Spotalpha’s algorithms evaluate the market every day to check, if the Alpha Portfolio requires rebalancing. When there is rebalancing, an notification email is sent to subscribers.
Each Alpha Portfolio consists of a range of 8 to 15 stocks, carefully selected for optimal performance. These portfolios undergo regular rebalancing, with a frequency of 5 to 8 times per year. This process ensures that the portfolio remains aligned with the desired investment objectives and takes advantage of market opportunities as they arise.
How to Use Large-Cap Alpha Portfolio