Financial Terms Glossary 📖
Navigating financial terminology can be challenging, especially when different sources use the same terms with slightly different meanings. Our glossary provides clear, practical definitions for the metrics and concepts you will encounter on the Mueasa platform and across the broader investment landscape.
Alpha
The excess return of an investment relative to a benchmark index. Positive alpha indicates outperformance; negative alpha indicates underperformance against the reference point chosen for comparison.
Beta
A measure of a security's volatility relative to the overall market. A beta of 1.0 moves in line with the market, above 1.0 is more volatile, and below 1.0 is less volatile than the benchmark.
Sharpe Ratio
A risk-adjusted performance metric calculated by dividing excess return over the risk-free rate by portfolio standard deviation. Higher values indicate better return per unit of risk taken.
Value-at-Risk (VaR)
A statistical estimate of the maximum potential loss a portfolio could experience over a specified time period at a given confidence level, commonly used to quantify downside risk exposure.
P/E Ratio
Price-to-earnings ratio compares a company's current share price to its earnings per share. It serves as a valuation indicator, with higher ratios suggesting the market expects stronger future growth.
Drawdown
The decline from a portfolio's peak value to its lowest point before a new peak is established. Maximum drawdown measures the worst observed loss and is a key indicator of portfolio resilience.
Correlation
A statistical measure between -1 and +1 indicating how closely two assets move together. Low or negative correlation between holdings is a foundation of effective portfolio diversification.
Free Cash Flow
The cash a company generates after accounting for capital expenditures needed to maintain or expand its asset base. It represents the money available for dividends, debt reduction, or reinvestment.
Rebalancing
The process of realigning portfolio weights back to target allocations after market movements have caused them to drift. Regular rebalancing helps maintain your intended risk level over time.