Unrealized returns show the current profit or loss on investments you still hold. They are often called paper gains or paper losses. They represent the difference between what you paid for an investment and what it is worth right now.
Unrealized returns help you understand how your portfolio is performing today, but the gains or losses are not final until you sell the investment.
Example
You buy an asset for £100 and the price becomes £120. Your unrealized return = (£20)
You could make £20 profit if you sell now but the profit is not locked in yet until you sell your assets. Accordingly, if the price drops before you sell, the unrealized return will also change.
You buy an asset for £100 and the price becomes £80 → Your unrealized return = (-£20)
Your unrealized return becomes realized only when you sell the asset. As long as your money is still in the market, the profit or loss is not locked.
Why it's useful
Instant performance visibility: You see in real time how much your holdings are up or down in order to get conscious decisions about your investments.
Transparent snapshot of portfolio value: Shows current market value instead of just historical gains/losses. Works well if your portfolio has volatile assets that change daily.