How to Calculate a Relative Return
- 1). Determine the absolute return. The absolute return of an investment is the return the investment shows for a specific period. For example, Investor A's portfolio had a gain of 15 percent during the past year.
- 2). Determine a benchmark return. The return can be for any benchmark an investor wants to compare the investment with. This return is usually found when researching an index or when calculating the return on a similar investment that is the benchmark. In our example, the benchmark is a stock index. This index for all of Investor A's stocks in his portfolio had an overall return of 8 percent for the year.
- 3). Subtract the benchmarked return from the absolute return to determine relative return. In our example, 15 percent minus 8 percent equals a relative return of 7 percent.
