What is Relative return ?
Definition of Relative return
The relative return is the return that a resource accomplishes over a period in comparison to a standard.
Brief Explanation of return
They are most often used when examining the efficiency of a common finance administrator. It is the difference between the overall return obtained by the resource and the return obtained by the standard. Because owners of common funds are billed management fees, they expect a supervisor to achieve profits higher than the standard catalog. For example, if the finance you are holding accomplishes an overall return of 12% over the past season while the standard catalog provides revenue of 15%, then the finance has obtained family members return of -3% for the season. The relative return shows how the return from a resource is in contrast to a standard. The choice of standard relies upon the trader. Relative return is useful as it provides the trader with an idea about the efficiency of one resource in comparison to that of another. The standard can be anything from the efficiency of a similar resource to the efficiency of an entire stock catalog.