I wanted advice on how to go about forecasting active return via a standard normal distribution,
The asset is a security with annual volatility of 6%. The benchmark is a 5% annual return with 0% volatility (basically a straight line)
Without a benchmark, i would just use the annual volatility and state that over a year, there is a 15.8% chance of this security returning <-6%.
But how would I approach this with a benchmark that has 0% volatility.
I want to be able to state that: there is an 15.8% chance this security will underperform the benchmark by X%. What would 1 std be in active return terms? -1%?