# How to Calculate Tracking Error in Excel: 4 Methods

### Method 1 – Make a Dataset with Proper Parameters

• To calculate tracking errors, we will make a dataset.

### Method 2 – Determine Active Return

• Select cell F5.
• Wwrite down the following formula.
`=D5-E5`

• Press Enter and use the Fill Handle to drag rightward to the remaining cells to see the result.

### Method 3 – Evaluate Squared Active Return

• Select Cell F5.
• Write down the following formula.
`=F5^2`

• Press Enter and use the Fill Handle to drag rightward to the remaining cells to see the result.

### Method 4 – Calculate Tracking Error in Excel

• Choose cell C14.
• Type the following formula to find the sum of all squared active returns.
`=SUM(G5:G12)`
• Hit Enter.

• You will see the sum of all squares.
• Select cell C15.
• Type the following formula.
`=C14/7`
• Press Enter.

• You will get the output.
• Write the following formula in cell C16 to determine the monthly standard deviation.
`=SQRT(C15)`
• Hit Enter.

• You will see the monthly standard deviation.
• Type the formula to calculate the tracking error in cell C17.
`=C16*SQRT(12)`
• Press Enter.

• You will see the final result of the annual tracking error here in the below image.

You may download the following Excel workbook for better understanding and practice it by yourself.

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Bishawajit Chakraborty

Bishawajit Chakraborty, a Rajshahi University of Engineering & Technology graduate with a B.Sc. in Mechanical Engineering, has been associated with ExcelDemy since 2022. Presently, he is a content developer, specializing in Excel Power Query, Data Analysis and VBA. It is worth mentioning that he has authored more than 90 articles on VBA content development. His profound interest lies in the fields of data analytics and data science. He possesses expertise in VBA, Power BI, machine learning, and Python... Read Full Bio

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