Tracking Error
A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge or mutual fund that did not work as effectively as intended, creating an unexpected profit or loss instead. Investopedia Says:
Tracking errors are reported as a "standard deviation percentage" difference. This measure reports the difference between the return you received and that of the benchmark you were trying to imitate. Related Terms:
Benchmark
Ex-Post
Ex-Post Risk
Hedge
Standard Deviation |