Excess Return Attribution

Excess return attribution is the process of breaking down the returns of a portfolio to determine which factors contributed to the performance above the benchmark. This helps investors understand if their returns are due to market beta, specific asset selection, or active management skill.

In crypto derivatives, this might involve separating returns from directional trading, basis trading, or funding rate harvesting. Attribution analysis allows for the refinement of trading strategies by identifying what works and what does not.

It provides transparency into the investment process and helps in setting realistic expectations for future performance. By isolating sources of profit, traders can focus their resources on the most effective strategies.