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Answer Wiki. The simple way to understand R2 is that R2 tells you how much variance is explained by your model. R2 equal to sum square regression/ sum square of total. It is the ratio between the variance of regression and the total variance of data.What does R2 mean in finance?
In statistics, R-squared (R2), or the coefficient of determination, is a widely used measure of a model (regression) performance against known observations. It is used in the asset management industry to measure the relationship between a portfolio and its benchmark.