Key Takeaways
- Tracking error is the standard deviation of the active return. Tracking difference is its mean. They answer different questions.
- Enter returns that are already after tax, in percent. The calculator does not know your tax rate and does not infer one.
- At least 2 paired observations are required, and short samples give unstable results.
- Annualizing multiplies the periodic figure by the square root of periods per year. That convention assumes independent periods.
- Everything runs in your browser. The returns you enter or paste are never sent to a Swoopr Investment server.
After-Tax Tracking Error Calculator
Enter matching periodic after-tax returns in percent, so 1.2 means +1.2%. Separate values with commas, spaces, semicolons or new lines. You can also paste or upload a two-column CSV below. The example button loads a hypothetical series so you can see every output first.
All processing runs in your browser. Nothing you enter is sent to Swoopr Investment's servers, stored, or logged. No live market data is connected: the calculator uses only the numbers you supply.
Assumptions and Method
- You supply after-tax returns. The calculator does not apply, estimate or infer any tax. If the two series are taxed on different bases, so is the answer.
- Returns are in percent. 1.2 means 1.2%, not 120%.
- Active return in each period is the portfolio's after-tax return minus the benchmark's after-tax return, taken as a simple difference.
- Tracking difference is the arithmetic mean of the active returns.
- Tracking error is the sample standard deviation of the active returns (divisor n − 1), which needs at least 2 observations.
- Annualization multiplies the periodic standard deviation by the square root of periods per year (√252, √52, √12, √4, or 1). This square-root-of-time convention assumes active returns are independent and identically distributed from period to period.
- Best and worst active period are the highest and lowest single-period active returns in the sample.
- Past dispersion only. The output describes the sample you entered. It is not a forecast, a ranking, or a recommendation.
For the framework behind this measurement, read After-Tax Tracking Error and Tracking Error and Tracking Difference. To compare an after-tax scenario against a baseline, use the Tax Alpha Calculator.
Worked Example
The example button loads this hypothetical monthly series: portfolio 1.2, -0.4, 2.1, 0.8, 1.4, -0.2 and benchmark 1.0, -0.3, 2.0, 0.9, 1.1, -0.1 (all percent, after tax). The active returns are 0.2, -0.1, 0.1, -0.1, 0.3 and -0.1. Their mean, the tracking difference, is about 0.05%. Their sample standard deviation is about 0.18% (0.176), and multiplying by the square root of 12 gives an annualized tracking error of about 0.61%. The figures are illustrative and describe no real portfolio.
What This Tool Does Not Do
- It does not calculate taxes. It cannot tell you whether a return is truly after tax or on what assumptions.
- It does not fetch data. No live feed or fund database is connected.
- It does not judge the result. A larger tracking error means the portfolio moved differently from the benchmark, in either direction.
- It is not personalized advice. A qualified tax professional can evaluate material personal tax decisions.
Frequently Asked Questions
What is after-tax tracking error?
After-tax tracking error is the sample standard deviation of the active return, where the active return in each period is the portfolio's after-tax return minus the benchmark's after-tax return. It describes how much the gap between the two moves around from period to period. The calculator uses the after-tax returns you enter and does not estimate any tax itself.
How is tracking error annualized?
The calculator uses the square-root-of-time convention. The periodic standard deviation is multiplied by the square root of the number of periods in a year: 252 for daily, 52 for weekly, 12 for monthly, 4 for quarterly, and 1 for annual. The convention assumes active returns are independent from period to period, which real return series only approximate. Turn annualization off to see the raw periodic figure.
What is the difference between tracking error and tracking difference?
Tracking difference is the average gap: the mean of the active returns. Tracking error is the variability of that gap: the sample standard deviation of the active returns. A portfolio can have a small tracking difference and a large tracking error, or the reverse. Neither number is a measure of gain or loss on its own.
How many observations do I need?
The calculator needs at least 2 paired observations, because a sample standard deviation is undefined for a single value, and it refuses to calculate with fewer. Two observations is a mathematical minimum, not a reliable estimate. Short samples produce unstable tracking error figures, so treat results from a handful of periods as illustrative.
What CSV format does the import accept?
Paste or upload two columns, portfolio after-tax return then benchmark after-tax return, both in percent, one row per period. A header row is optional and is skipped when both of its cells are text. Commas, semicolons and tabs are accepted as separators. Rows with a missing cell, a non-numeric value, a value larger than 1000 in magnitude, or more than 5,000 rows are rejected with a message naming the problem. Everything is processed in your browser.
Does the calculator work out my taxes?
No. It does not know your tax rate, account type, holding period or lot method, and it never infers any of them. You supply returns that are already after tax, calculated by you or taken from a report, and the calculator measures the gap between two such series.
References
- IRS: Publication 550, Investment Income and Expenses: how investment income and gains are taxed, the reason after-tax and pre-tax returns differ.
- IRS: Topic No. 409, Capital Gains and Losses: the treatment of realized gains that drives the after-tax return series you enter.
Jurisdiction: United States tax references. The standard deviation and annualization method is standard statistics and needs no external source. Last reviewed by the Swoopr Editorial Team in October 2026. This page is educational and is not personalized tax or investment advice.