Tracking Error

Jessica
Jessica
  • Updated

Tracking Error Definition

Tracking Error measures the difference between the returns of a stock, fund or portfolio and the returns of its benchmark. 

 

How we Calculate Tracking Error

We use the same formula for individual stocks and funds as well as portfolios.

The formula we use to calculate the Tracking Error is:

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For further reading, Investopedia is a great resource with video explainers. The page on Tracking Error can be found here.