market
β Beta
A measure of a stock's volatility relative to the overall market (S&P 500 = 1.0). How much the stock moves when the market moves.
Formula
β = Covariance(Stock, Market) / Variance(Market)
How to Interpret
Beta 1.0 = moves with the market. Beta 1.5 = 50% more volatile. Beta 0.5 = half as volatile. Negative beta (rare) means the stock moves opposite to the market. Tech stocks typically have beta > 1, utilities < 1.
Why It Matters
Beta helps you understand portfolio risk. A portfolio of high-beta stocks will amplify market swings. It's also used in CAPM (Capital Asset Pricing Model) to calculate expected returns and cost of equity.
Example
A beta of 1.5 means a stock has historically moved about 1.5% when the market moved 1%. A 10% market decline would therefore imply an approximately 15% move in the same direction, on average.