What Is the Beta of a stock?

Beta is a measure of a stock's volatility in relation to the overall market. By definition, the market, such as the S&P 500 Index, has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market.

Tip : a stock that swings more than the market over time has a beta above 1.0. When a stock moves less than the market, the stock's beta is less than 1.0. Stocks which have high Beta may be riskier but could provide higher return potential. Stocks which have a low Beta may be less risky but would also have lower returns.

Top