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Beta is a popular risk measure of a security or portfolio used in the capital asset pricing model (CAPM). It shows how asset price moves in comparison to its reference market.

Beta always measured with respect to the market as a whole or some benchmark. So, one asset may have different betas depending on the used benchmark.

What beta can tell you

The beta coefficient could take any value, positive or negative. A positive beta means that the asset price moves in the same direction as its benchmark. A negative beta means that the asset price is moving in the opposite direction.

Beta value shows the strength of asset price correlation with the market. For example, a beta of 2 means that assets price gains or losses roughly twice as much as the market. This is usually a sign of a riskier or leveraged asset. A beta of 0.5 indicates that the stock is less susceptible to market moves and, usually, less volatile. Beta equal to 0 indicates that the asset price movement does not correlate with the market.


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Beta Settings

S&P 500

Rolling 12-month Beta Chart

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Rolling 12-month Alpha Chart

Alpha is another indicator closely related to Beta, which shows how well a stock or portfolio has performed in comparison to the broad market.

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