A statistical measure that determines the proportion of variance in the dependent variable that can be explained by the independent variable

R-squared is a statistical value representing the percentage of the movement in the price of an asset which can be explained by the movements of an underlying index. The value of R-squared can range from 0 to 100 (i.e. 100 means 100% of the asset movement is explained by the index, 0 meaning none of it is).

Higher values of R-squared mean that beta is more useful and should be considered. An asset with an extremely high R-squared and a low beta (<1) will provide higher risk-adjusted returns.

Excel Modeling Course

Everything You Need To Master Excel Modeling

To Help You Thrive in the Most Prestigious Jobs on Wall Street.

Learn More

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources: