Using Beta to Understand a Stock’s Risk
A stock’s beta indicates how volatile its price is compared to other stocks. And that is a clue to the degree of risk you’re taking in buying that stock.
In short, a beta number above 1 indicates a stock whose price has greater ups and downs than the market as a whole. A number below 1 stays steady. A zero means the stock is precisely as volatile as the market at large.
The current beta for a stock is listed on its quote summary page on most financial websites and trading platforms.
Key Takeaways
- Beta indicates how volatile a stock’s price is in comparison to the overall stock market.
- A beta greater than 1 indicates a stock’s price swings more wildly than the overall market.
- A beta of less than 1 indicates that a stock’s price is…
