This is known as tracking error.
Tracking error refers to the distinction between the performance of a particular index and the results of an investment portfolio. This term is often used in the realm of finance to measure the effectiveness of a portfolio manager in replicating the index's returns. It is a crucial concept to understand as it provides insight into the level of risk and deviation from the index that an investment may have. In simpler terms, tracking error allows us to evaluate the success of an investment strategy in comparison to the market's performance.
