THE R2 REVEALS INFORMATION ABOUT THE TWO FUNDS’ CORRELATIONS WITH T...

2. The R

2

reveals information about the two funds’

correlations with the S&P 500. In the absence of specific

information about the two funds’ riskiness, it is possible

that Foreman has a higher standard deviation and/or beta,

thus resulting in lower risk-adjusted performance as

evaluated by a risk-adjusted performance measure such as

the Sharpe ratio or Jensen’s alpha.