Building a handrail for your deck may seem like a simple task. In many cases it is -- until the time arrives to figure out how to get the balusters or spindles evenly spaced along the handrail. Evenly spaced spindles improve the symmetry of the rails and lend a professional look to the project. But finding the right measuring formula may give the average home handyman pause.
R-squared is a statistical measurement that determines the proportion of a security's return, or the return on a specific portfolio of securities, that can be explained by variations in the stock market, as measured by a benchmark index.
R-squared does not, however, measure the performance of a portfolio, but it does measure the correlation of the portfolio's returns to the benchmark's returns. If an investor is seeking a portfolio or a fund that moves like the benchmark it would be wise to invest in a product or strategy with a high R-squared number.