R-Squared to Measure a Stocks Performance Pattern with the S&P 500 Index.
R-Squared is the square of the correlation R and is used to measure a security against a benchmark like the S&P 500. Correlation is usually used to show the performance pattern between two different securities in relation to each other.
Here is a screen image from ZOONOVA that shows the R-squared calculation for stocks against the S&P 500. A high R-squared means the performance pattern of the security is closely linked to the underlying S&P 500 Index. R-squared is measured on a % scale from 0 - 100%. You can also see the graphs for R-squared at the bottom of the screen that display the calculated output from scanning 8,500 different stocks and ETFs for the Top 5 high and low.
Cheers.
More from Blaise Labriola
The most important insight of the day
Get the Harvest Daily Digest newsletter.