Sep 21, 2025 · Tracking error is calculated by taking the standard deviation of the difference between the portfolio returns and the benchmark returns over a specified period.

Guide to Tracking Error Formula. Here we discuss how to calculate tracking error for the portfolio with examples and excel template.

Tracking error is frequently categorized by the way it is calculated. A realized (also known as “ex post”) tracking error is calculated using historical returns. A tracking error whose calculations …

Jun 2, 2024 · In this article, we will determine parameters such as Active Return, and Squared Active Return to calculate the tracking error in excel.

In a factor model of a portfolio, the non-systematic risk (i.e., the standard deviation of the residuals) is called "tracking error" in the investment field. The latter way to compute the …

May 12, 2025 · To find tracking error, subtract the benchmark’s total returns from the investment portfolio’s returns. The portfolio returns are deducted from the benchmark first. Thereupon, the …

Nov 30, 2025 · To figure out which fund best tracks an Underlying index, we can calculate the fund's tracking error. There are two ways to measure tracking error- The first is to subtract the …

Oct 10, 2019 · Tracking Error = Portfolio return – Target index return. Example: Suppose a given portfolio offers a 7% return while the benchmark offers a 10% return. The tracking error is – …

Jan 23, 2024 · Tracking error can be calculated using various methods, such as the standard deviation of excess returns or the root mean square error (RMSE). Both methods involve …

Tracking error is the difference between an investment portfolio’s returns and the index it mimics or tries to beat. Know its formula, factors, significance.