when using a generated alpha calculation it is important to understand the calculations involved alpha can be calculated using various different index benchmarks within an asset class in some cases there might not be a suitable preexisting index in which case advisors may use algorithms and other models to simulate an index for comparative alpha calculation purposes 
alpha can also refer to the abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like capm in this instance a capm might aim to estimate returns for investors at various points along an efficient frontier the capm analysis might estimate that a portfolio should earn 10 based on the portfolio s risk profile if the portfolio actually earns 15 the portfolio s alpha would be 5 0 or 5 over what was predicted in the capm 