What do Sharpe, Sortino, alpha, beta and standard deviation actually tell you about a mutual fund?

Each ratio answers one question. Standard deviation: how bumpy the ride has been. Beta: how much of that comes from the market itself, where 1.0 moves with the benchmark. Sharpe: return earned per unit of total volatility. Sortino: the same idea but counting only downside deviation, which is closer to what actually hurts. Alpha: return above what the benchmark plus the fund's beta already explain. Read them together — any one alone is easy to misread.

The trap is that these are not facts about a fund, they are outputs of a calculation, and every source picks its own inputs. Three choices move the numbers: the return frequency (daily vs monthly NAV), the risk-free rate used in Sharpe and Sortino, and the benchmark used for alpha and beta. Change the risk-free rate by a percentage point and every Sharpe on the page shifts. This is why two reputable sources can publish different Sharpe ratios for the same fund over the same three years and neither is wrong.

So insist on knowing the parameters before you compare numbers across sites — and never mix them. A Sharpe from one source and a Sortino from another tells you nothing about the same fund. FundLens computes every figure the same way: daily NAV history from AMFI, a trailing 3-year window, a 6.5% risk-free rate (roughly the 10-year G-Sec), and a per-category benchmark — Nifty 500 for multi cap and flexi cap, Nifty Smallcap 250 for small caps, Nifty Midcap 150 for mid caps, Nifty 50 for large caps.

The benchmark choice is the one that does the most damage when it is wrong. Plenty of sources quote a small-cap or mid-cap fund's alpha and beta against the Nifty 50. That produces flattering alpha and a beta comfortably above 1 — but both are describing the asset class, not the fund manager. A small cap measured against a large-cap index will always look volatile and always look clever. Neither number is about skill.

Two ratios you will see elsewhere that FundLens does not publish: R-squared and the information ratio. R-squared is worth understanding anyway, because it tells you whether alpha and beta mean anything at all — it measures how much of the fund's movement the benchmark explains. Below roughly 0.7, the benchmark is a poor fit and the alpha and beta computed against it are mostly noise, which is exactly the situation with a sector fund measured against a broad index. The information ratio measures how consistently a fund beats its benchmark rather than by how much.

If you want one number to lead with, use Sortino rather than Sharpe: it stops punishing a fund for volatility that went in your favour. Then sanity-check alpha only once you are satisfied the benchmark actually fits. Multi cap funds ranked by Sortino on our own parameters are below. This is research, not investment advice.