# R-Squared

*Math & Statistics — Finicade finance glossary*

R-squared is the share of the variation in the outcome that a regression explains, from 0 to 1. It is routinely over-read: a high R-squared says the model fits this sample, not that it is correct, causal or predictive. Adding any variable raises it mechanically, which is why adjusted R-squared penalises extra terms, and why a 0.99 fit on financial data usually means the model has memorised noise.

**Formula:** `R² = 1 − (Residual sum of squares ÷ Total sum of squares)`

**Also known as:** R², coefficient of determination, r squared

**Related terms:** [Regression](https://finicade.com/glossary/regression), [Ordinary Least Squares](https://finicade.com/glossary/ordinary-least-squares), [Residual](https://finicade.com/glossary/residual), [Overfitting](https://finicade.com/glossary/overfitting), [Correlation](https://finicade.com/glossary/correlation)

Source: https://finicade.com/glossary/r-squared