What is the difference between absolute return and relative return?

The biggest difference between absolute return and relative return is that absolute return only looks at one asset or one portfolio. There are no comparisons made between it and anything else. With the relative return, you can gauge how a security or portfolio is doing against the larger backdrop of the market.

How do you calculate relative return?

To calculate the relative return, you’d first need to find the absolute return for an investment. Then, you’d calculate the difference between the asset’s absolute return and a benchmark or index return. The biggest difference between absolute return and relative return is that absolute return only looks at one asset or one portfolio.

What is the difference between absolute and relative performance?

Relative performance is the comparison of the returns of your portfolio to that of some benchmark index. Absolute performance is the return of the portfolio itself on a year-over-year basis. Absolute return investing can beat average market returns with less risk and volatility over time. Absolute returns or relative?

What is a relative return on an investment?

The relative return on an investment provides the investor with insights into the performance of the asset relative to a benchmark. For example, the investor might want to evaluate the performance of a domestic stock mutual fund versus the S&P 500 Index.