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Let’s say we have the monthly returns of a US portfolio and we want to know its Alpha and Beta against the S&P 500 index. Rp is the portfolio return, Rm is the market return and Rf is the risk-free rate.
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The equation below is what we want to fit. If you want a recap on what Alpha and Beta is, please read this article. Regression Example (Alpha and Beta) Finding the Alpha and Beta of a Portfolio Else, let’s see how we can use Excel to find the Alpha and Beta of a portfolio. In case you want a more rigorous treatment of the topic, you can look up Wikipedia. If you took high school math, this should not be something unfamiliar. I am not going into the academic details. Given the Ys and Xs, linear regression tells you what are the ms (gradients) and c (constant).