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A popular Wendy's commercial in the 80s made famous the question: "Where's the beef?" Good one. And here's an even better one: "Where's the alpha?" You might want to whip this one out the next time you meet with your portfolio manager.
Alpha is the over-and-above-the-expected return. It is the "value added." Therefore, it makes sense that a positive alpha means an investment has outperformed its market-predicted return, while a negative alpha would mean just the opposite. The expected return is calculated by a formula that takes into account the investment's level of unavoidable risk (aka beta).
Ever stepped into an elevator and after the doors close you become aware of an almost-suffocating scent coming from the woman next to you who must have bathed in perfume? Well, as you know, once the doors close you can't escape the smell until the ride is over. This is similar to beta, which is risk that can't be reduced or diversified away. A measure of "systematic" or market related risk, beta is used as a measure relative to a certain index -- such as the S&P 500.
So, for example, let¿s say your portfolio is managed to compete against the S&P 500. If you generate a better return than the index while not taking on added risk (standard deviation of returns) then you get alpha. Low beta means the market-related risk is low and vice versa for high beta.
Another example, let's say a mutual fund or stock has a beta of 1.5 relative to the S&
P500 ¿ that means it is 1.5 times as risky. So, over time, if the S&P 500 goes up 1%, your portfolio should be up 1.5%
plus (one can hope) some percentage of alpha. If the S&P 500 is down 1%, your portfolio should be down 1.5%.
Alpha
and beta are based off of linear regression of a set of data. Warning: this may cause a high school fifth-period flashback,
but it will be over before you know it:
The equation for a line is Y = a + bX.
a = alpha (the Y intercept - the added
value)
b = Beta (the coefficient you multiply X by)
X = S&P 500 (in this case)
Y = your portfolio
Home / Markets / Industries / Industrials
Monday, May 12, 2008
EURO Ressources : FURTHER LIQUIDATION OF GOLD HEDGE
Comtex
PARIS, May 12, 2008 (MARKET WIRE via COMTEX News Network) ----FURTHER LIQUIDATION OF GOLD HEDGE
EURO Ressources S.A. (TSX: EUR) (Paris: EUR) today announced that it has now completed the liquidation of the remaining gold hedge for the third quarter of 2008. The recent decline in the gold price has allowed the liquidation of the hedge in accord with the board's previously announced policy of using available cash flow to liquidate EURO's gold hedge position.
The company expects to eliminate all or substantially all of the remaining hedge position by the end of 2008. Following the liquidation of the third quarter gold hedge, EURO has 27,500 ounces of gold derivative contracts outstanding, scheduled as 4,700 ounces settling in the fourth quarter of 2008 and 5,700 ounces for each calendar quarter in 2009.
About EURO
EURO is a French company, focused on owning royalties and similar interests on operating gold mines. EURO also holds certain gold mineral rights in French Guiana including Paul Isnard which comprises 8 concessions and a PER over 140 sq. km.
EURO has approximately 60.6 million shares outstanding.
Statements Regarding Forward-Looking Information: Some statements in this news release are forward-looking statements. Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties. Such statements include comments regarding the Company's intentions with respect to it reduction of its hedge position. There can be no assurance that future developments affecting the Company will be those anticipated by management.
Not for distribution to United States newswire services or for dissemination in the United States. The securities referred to herein have not been registered under the US Securities Act of 1933 and may not be offered or sold in the United States or to a US person absent registration or an applicable exemption from registration.
Additional information relating to EURO Ressources S.A. is available on SEDAR at www.sedar.com. Further requests for information should be addressed to:
James H. Dunnett
Directeur-General
Tel.: +1 604 710 2242
Email : jhdunnett@aol.com
Susanne A. Hermans
Vice-President Finance
Tel.: +1 303 204 7771
Email : shermans@euroressources.net
This information is provided by HUGIN
SOURCE: EURO Ressources
Copyright 2008 Market Wire, All rights reserved.
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