Alpha Pro Indicator: Jensen's Alpha with Beta Regime Context
Measure risk-adjusted excess returns with Alpha Pro indicator. Implements Jensen's Alpha methodology with real-time calculation, beta regime context, and RAM & APS metrics for superior trading decisions.
Profabighi Capital Research Team
December 29, 2025
Trading Risk Warning
Trading Risk Warning: Trading involves substantial risk of loss and is not suitable for all investors. Past performance does not guarantee future results. You should carefully consider your financial situation and consult with financial advisors before making any investment decisions.
TradingView Scripts
What is Alpha Pro Indicator?
The Alpha Pro Indicator is an advanced implementation of Jensen's Alpha methodology, transforming traditional portfolio performance analysis into an actionable trading tool for cryptocurrency markets. Alpha measures risk-adjusted excess returns relative to a benchmark, providing traders with critical insights into whether an asset is outperforming or underperforming its expected return based on systematic risk exposure.
Key Features
Jensen's Alpha Methodology:
- Risk-adjusted excess return measurement
- CAPM-based performance decomposition
- Skill vs. market return isolation
- Real-time rolling window calculation
Visual Dashboard:
- Color-coded alpha line (green/red)
- Zero reference line
- Performance trend visualization
- Benchmark comparison
Why Use Alpha Pro?
1. Distinguish Skill from Market Exposure
Benefits:
- Identify genuine alpha generation
- Separate beta-driven returns
- Validate trading strategies
- Optimize portfolio allocation
2. Real-Time Performance Monitoring
Applications:
- Continuous alpha calculation
- Live performance updates
- Regime change detection
- Timely decision-making
3. Flexible Benchmark Selection
Use Cases:
- Bitcoin benchmark for altcoins
- Ethereum for DeFi analysis
- Sector-specific comparisons
- Custom benchmark selection
Alpha Pro Trading Strategies
Strategy 1: Alpha Momentum Trading
Concept: Trade assets with increasing alpha
Rules:
- Monitor alpha tracker daily
- Identify assets with rising alpha
- Enter when alpha crosses threshold
- Exit when alpha declines
Thresholds:
- Entry: Alpha > 0.5 and rising
- Exit: Alpha < 0.2 or declining
- Stop loss: Alpha turns negative
Strategy 2: Alpha Rotation
Objective: Rotate capital to highest alpha assets
Process:
- Track alpha for all positions
- Rank by current alpha
- Allocate more to top performers
- Reduce exposure to low alpha
Strategy 3: Alpha Threshold System
Setup: Set alpha targets and limits
Parameters:
- Target alpha: > 1.0 (excellent)
- Acceptable alpha: 0.3-1.0 (good)
- Warning alpha: 0-0.3 (weak)
- Exit alpha: < 0 (negative)
Interpretation for Traders
Positive Alpha: Asset outperforming benchmark on risk-adjusted basis
Negative Alpha: Asset underperforming benchmark on risk-adjusted basis
Zero Alpha: Asset performing in line with CAPM expectations
FAQ
What's the difference between Alpha and Alpha Pro?
Alpha Pro implements Jensen's Alpha with advanced features including real-time calculation, flexible benchmark selection, and color-coded visualization for instant assessment.
How often does Alpha Pro update?
Alpha Pro updates with each new bar/candle, providing near real-time alpha measurements based on your selected timeframe.
What's a good alpha value?
Alpha > 1.0 is excellent, 0.3-1.0 is good, 0-0.3 is acceptable, and < 0 indicates underperformance.
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