Alpha
The part of a return that beats a benchmark after accounting for the risk taken.
In plain English
The part of a return that beats a benchmark after accounting for the risk taken. Skill, or luck dressed up as skill.
Alpha is the extra return a trader or fund earns above what you would expect just from riding the market. If the market rose 8% and a fund with the same risk made 11%, that 3% gap is its alpha.
Its partner is beta, the return you get simply from being exposed to the market. Beta is cheap; alpha is the thing managers charge fees for, and it is famously hard to find consistently once costs are taken out.
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