Beta (β) Calculator
Beta (β) Calculator: Measure Stock Market Risk
Beta (β) is a key measure for investors to understand how a stock or portfolio responds to overall market movements. A Beta Calculator helps you quickly determine if a stock is more or less volatile than the market.
Select Your Favorite Section
What is Beta (β)?
Beta (β) quantifies a stock’s systematic risk relative to the market.
- β = 1: Stock moves exactly with the market.
- β < 1: Stock is less volatile than the market.
- β > 1: Stock is more volatile than the market.
Beta Formula: β=Covariance (Stock, Market)Variance of Market\beta = \frac{\text{Covariance (Stock, Market)}}{\text{Variance of Market}}β=Variance of MarketCovariance (Stock, Market)
- Covariance: Measures how stock returns move with the market.
- Market Variance: Measures volatility of the market.
Beta is essential for risk-adjusted portfolio management and for calculating metrics like the Treynor Ratio and CAPM expected returns.
How to Use the Beta Calculator
- Enter Covariance with Market.
- Enter Market Variance.
- Click Calculate.
The calculator displays Beta (β) and a color-coded indicator:
| Beta (β) | Interpretation | Indicator |
|---|---|---|
| < 1 | Low volatility: Less sensitive to market | ✅ Green |
| 1 | Neutral: Moves with the market | ⚠️ Orange |
| > 1 | High volatility: More sensitive to market | ❌ Red |
Example:
- Covariance = 0.012
- Market Variance = 0.02
β=0.0120.02=0.6β = \frac{0.012}{0.02} = 0.6β=0.020.012=0.6
✅ Low volatility: The stock is less sensitive to market swings.
Why Beta Matters
- For Investors: Helps assess risk and volatility relative to the market.
- For Portfolio Managers: Decide portfolio allocation based on market risk exposure.
- For Analysts: Essential for CAPM and risk-adjusted performance metrics like Treynor Ratio.
A low-beta stock can reduce portfolio risk, while a high-beta stock can provide higher returns if the market is rising.
Key Takeaways
- Beta measures a stock’s market-related risk.
- β < 1: Less sensitive to market movements.
- β = 1: Moves in line with the market.
- β > 1: More volatile than the market.
- Use Beta with Sharpe, Treynor, and Sortino Ratios for full risk-return analysis.
Try the Beta Calculator Now
Use our Beta (β) Calculator to quickly understand the market risk of your investments and make smarter, risk-aware decisions.
