What is the focus of the 'measure relative risk' step in performance evaluation?

The focus of the 'measure relative risk' step in performance evaluation is primarily on comparing the performance of an investment or portfolio against a benchmark. This benchmark serves as a standard for measuring how well the investment has performed in relation to the market or a specific index.

By assessing relative risk, investors and analysts can determine whether the returns achieved are commensurate with the risks taken. It involves understanding how much risk is associated with the investment compared to the benchmark, which helps in making informed decisions about performance attribution. This comparison is vital for understanding the effectiveness of investment strategies and for identifying whether the portfolio manager is adding value relative to the risks involved.

The other options, while relevant to investment analysis, do not specifically pertain to the focus of measuring relative risk. Analyzing internal processes is more about operational efficiency and effectiveness, identifying new investment opportunities relates to growth and expansion, and forecasting future trends pertains to predicting market movements rather than measuring how current performance stands against a benchmark.