Beta

Beta measures a stock's price volatility, or risk, compared to the broader market, usually the S&P 500 which has a beta of 1.0. It indicates how much a stock price moves relative to market swings, with higher numbers representing higher risk and volatility. 

Investopedia +1

• Beta = 1.0: The stock moves with the market.

• Beta > 1.0: The stock is more volatile than the market (e.g., 1.5 means 50% more volatile).

• Beta < 1.0: The stock is less volatile than the market. 

Key Takeaways

• Volatility Indicator: A high-beta stock (e.g., tech, growth) typically rises more during upswings and falls more during downturns, notes Gotrade.

• Risk Measure: A low-beta stock (e.g., utilities) is generally considered less risky and more stable, says Financial Edge Training.

• Calculation: It is calculated by comparing historical stock returns to market returns using linear regression.

• Limitations: Beta is based on historical data and does not predict future behavior, explains Gotrade. 

It is widely used in the Capital Asset Pricing Model (CAPM) to calculate expected returns.