alpha_and_beta

study(title="Alpha/Beta", shorttitle="Alpha/Beta")

////SHOULD BE USED TOGETHER WITH "Beta" INDICATOR
//Alpha is a measure of the active return on an investment, the performance of that investment compared to a suitable market index, where 0.01 = 1%
//alpha < 0: the investment has earned too little for its risk (or, was too risky for the return)
//alpha = 0: the investment has earned a return adequate for the risk taken
//alpha > 0: the investment has a return in excess of the reward for the assumed risk

//Beta Calculation
sym = "IBOV", res=period, src = close, length = input(title="rolling beta window",defval=300, minval=1)
ovr = security(sym, res, src)
ret = ((close - close[1])/close)
retb = ((ovr - ovr[1])/ovr)
secd = stdev(ret, length), mktd = stdev(retb, length)
Beta = correlation(ret, retb, length) * secd / mktd

//Alpha Calculation
y = input(title="alpha period", type=integer, defval=90, minval=1, maxval=1000)
ret2 = ((close - close[y])/close)
retb2 = ((ovr - ovr[y])/ovr)
alpha = ret2 - retb2*Beta
plot(alpha, color=green, style=line, transp=40)
plot(Beta, color=red, style=line, transp=40)