Plain-English definitions, reviewed by an independent investor
Beta (Stock Volatility vs Market)
Beta measures how much a stock tends to move compared with the overall market. 1.0 moves with the market; above 1 swi…
Beta measures how much a stock tends to move compared with the overall market. 1.0 moves with the market; above 1 swings more.
Beta = Covariance(Stock, Market) ÷ Variance(Market)
Why it matters
It tells you how much market risk you are taking on before you buy.
Common confusion
Beta looks backward at past price moves and ignores company-specific news, so it is not a forecast.
Frequently Asked Questions
Is a high beta good?
A high beta can win big in rallies but fall harder in drops. It suits risk-tolerant investors.
What does beta 0.5 mean?
The stock has historically moved about half as much as the market in the same direction.