Risk
Beta
Beta measures how much a stock has tended to move when the market moves.
A beta of 1 means the stock has moved with the market. A beta of 1.5 means it has moved about one and a half times as much. A beta below 1 means it has been calmer than the index. Beta is estimated from history, often a few years of weekly or monthly returns, so it describes the recent past rather than a law of the future.
Stocklytics publishes beta on screener rows and uses a high-beta screen for investors who want movers. High beta is not the same thing as a good opportunity. It means larger swings, including down. In a DCF, beta is an input to the cost of equity. A stale beta from a quiet period will understate the discount rate of a stock that has since become a story stock.
Formula
Beta = covariance(stock returns, market returns) ÷ variance(market returns)
Live example
Apple Inc. (AAPL) last printed at $345.33 with a market cap of $5.04T. Beta on the row is 1.07. The latest session move is unavailable.
Related
Volatility · Sharpe Ratio · WACC
See it on a list: best stocks · screener
Questions
Can beta be negative?
Yes. A negative beta means the stock has tended to move opposite the market. It is rare and often unstable. Gold miners and some defensives occasionally print it.
Does beta measure all risk?
No. It measures market-linked volatility. A company can have a moderate beta and a real chance of a dilutive raise, a lawsuit, or a fraud. Those are not in beta.