What Beta Means When Considering a Stock’s Risk
| Beta Values and What They Mean | |
|---|---|
| Beta | Meaning |
| 1.0 | The stock moves in line with the broader market |
| 2.0 | The stock moves twice as much as the broader market |
| 0.0 | The stock’s moves don’t correlate with the broader market |
| -1.0 | The stock moves in perfectly inverse versus the broader market |
Tip
A stock has a negative beta if its price moves in the opposite direction of the market. A stock with a beta of -0.5, for example, would drop 0.5% for every 1% rise in the broader market.
Calculating the Beta for a Stock
It’s easiest to just check the stock’s webpage to find its beta, but an investor can calculate the number. There are several steps:
- Step 1 -Compile Historical Price Data: Obtain historical price data…
