Quantitative Analysis

Quantitative analysis is a branch of financial analysis that focuses on using data and mathematical techniques to inform investment decisions. Harry Markowitz pioneered modern quantitative analysis with his introduction of Modern Portfolio Theory in the early 1950s.

Frequently Asked Questions
  • What Is the Difference Between Alpha and Beta in Finance?

    Alpha measures how much an investment outperforms or underperforms a benchmark. Beta is a measurement of an investment’s volatility and is one measurement of an investment’s risk.

  • What's the Difference Between an Investment’s Sharpe Ratio and its Treynor Ratio?

    Both ratios exist to try and quantify the risk-adjusted return of an investment. The primary difference between the two is that the Sharpe Ratio measures an investment’s performance against the risk-free rate of return, the Treynor ratio measures it versus equity markets more broadly.

  • How Do You Calculate an Investment’s Beta?

    You calculate the beta of an investment by taking the covariance between the return of a specific investment and broader market return and then dividing that by the variance of broader market returns.

  • What Is a Good Sharpe Ratio?

    A Sharpe Ratio over 1 indicates that an investment has a higher risk-adjusted return than the risk-free rate of return. The higher it is over 1 is how much better a risk-adjusted rate of return it has.

Key Terms

Explore Quantitative Analysis

Modern Portfolio Theory
Modern Portfolio Theory: What MPT Is and How Investors Use It
Charting the Market
Alpha vs. Beta: What's the Difference?
Fama and French Three Factor Model Definition: Formula and Interpretation
Calculator and Charts
Understanding the Sharpe Ratio
Unlevered Beta
Unlevered Beta: Definition, Formula, Example, and Calculation
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Arbitrage Pricing Theory (APT) Formula and How It's Used
Quantitative Analysis: Using mathematical and statistical modeling, measurement, and research to understand behavior.
Quantitative Analysis (QA): What It Is, How It's Used in Finance
How Do You Calculate Beta in Excel?
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Sortino Ratio: Definition, Formula, Calculation, and Example
Treynor Ratio: What It Is, What It Shows, Formula To Calculate It
What Is a Sharpe Ratio? Understanding Its Use in Investing
How to Calculate Beta in Excel
CAPM vs. Arbitrage Pricing Theory: What's the Difference?
CAPM, Capital Asset Pricing Model.
CAPM Model: Advantages and Disadvantages
What Is Quantitative Trading? Definition, Examples, and Profit
Modern Portfolio Theory: Why It's Still Hip
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Quant Fund: Definition, How They Work, Performance, and Risks
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Trading High-Beta Stocks: Risk vs. Reward
Arbitrage Pricing Theory: It's Not Just Fancy Math
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Using Quantitative Investment Strategies
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Zero-Beta Portfolio: Definition, Formula, Example
Sharpe Ratio vs. Treynor Ratio: What's the Difference?
Stock Market Chart
How Do You Calculate the Sharpe Ratio in Excel?
Digital stock market chart
What's the Relationship Between R-Squared and Beta?
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The Difference Between the Sharpe Ratio and the Sortino Ratio
How Is Covariance Used in Portfolio Theory?
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Correlation and Modern Portfolio Theory
Businessmen Analyzing Charts on Laptop in Office
How Beta Measures Systematic Risk
How Does Debt Affect a Company's Beta?
Investor analyzing stock market investments with financial dashboard, business intelligence (BI), and key performance indicators (KPI) on smartphone and computer screens
High Beta Index
R-Squared vs. Beta: What's the Difference?
A Deeper Look at Alpha
Modern Portfolio Theory vs. Behavioral Finance
How Is Risk Aversion Measured in Modern Portfolio Theory (MPT)?
Beta Risk: What it is, How it Works, Examples
Example of Applying Modern Portfolio Theory (MPS)
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Post-Modern Portfolio Theory (PMPT): What it is, How it Works
close up of man hand analyzing stock market chart
Portable Alpha: What it Means, How it Works
What is the difference between the Sharpe ratio and alpha?
Weighted Alpha: Meaning, Calculation, Inferences
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Alpha Generator: Meaning, International Investments, Examples
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Markowitz Efficient Set: Meaning, Implementation, Diversification
How the Sharpe Ratio Can Oversimplify Risk
BETA under a microscope.
Calculating Beta in Excel: Portfolio Math For The Average Investor
International Beta