The beta (β) of an investment security (i.e. a stock) is a measurement of its volatility of returns relative to the entire market. … β 0 less volatile than the market. β =0 uncorrelated to the market. β What does a beta of 1.0 mean for an individual security?
A beta of 1.0 means that for every 1% change in the market, an individual security or investment will likely move 1%. In other words, it tracks directly with the market. Stocks with betas greater than 1.0 have more amplified movements than the market itself; they have a greater level of risk.
What does a 1.0 beta mean?
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. … If a stock moves less than the market, the stock’s beta is less than 1.0.
What does a beta of 0 imply?
A beta value between 0 and 1 indicates that the stock is less volatile than the market as a whole, and a value greater than 1 indicates more volatility. A beta value of 0 means the stock’s performance is uncorrelated with the market. You may also see beta values below 0, indicated with a negative sign.
What security has a beta of 1?
99, security B has a beta of 1.2, and security C has a beta of -1.0. This information indicates that security A has the highest degree of market risk. security B has 20% more systematic risk than the market.
Is a high beta good or bad?
A high beta means the stock price is more sensitive to news and information, and will move faster than a stock with low beta. In general, high beta means high risk, but also offers the possibility of high returns if the stock turns out to be a good investment.
What is a monthly beta?
Beta is the monthly price change of a particular company relative to the monthly price change of the S&P500. The time period for Beta is 3 years (36 months) when available.
What does a beta higher than 1 mean?
A beta greater than 1 indicates that the security’s price tends to be more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market. Many young technology companies that trade on the Nasdaq stocks have a beta greater than 1.
What is the 60 month beta?
Beta is a measure of a company’s common stock price volatility relative to the market. It is calculated as the slope of the 60 month regression line of the percentage price change of the stock relative to the percentage price change of the relevant index (e.g. the FTSE All Share).
What kinds of investments might have a negative beta?
A standard example that is offered for a negative beta investment is gold, which acts as a hedge against higher inflation (which devastates financial investments such as stocks and bonds). It is also true that puts on stocks and selling forward contracts against indices will have negative betas.
What is considered a high beta?
What are high-beta stocks? A high-beta stock, quite simply, is a stock that has been much more volatile than the index it’s being measured against. A stock with a beta above 2 — meaning that the stock will typically move twice as much as the market does — is generally considered a high-beta stock.
What does beta stand for?
BETA
| Acronym | Definition |
|---|---|
| BETA | Break It Early Test Application |
| BETA | British Equestrian Trade Association |
| BETA | Beirut for the Ethical Treatment of Animals (est. 2004; Beirut, Lebanon) |
| BETA | Branch Equivalent Tax Account (New Zealand) |
Can a stock have a zero beta?
A zero-beta portfolio is a portfolio constructed to have zero systematic risk, or in other words, a beta of zero. … Such a portfolio would have zero correlation with market movements, given that its expected return equals the risk-free rate or a relatively low rate of return compared to higher-beta portfolios.
How do you calculate total risk?
Total risk = Systematic risk + Unsystematic risk
Unsystematic risk is essentially eliminated by diversification, so a portfolio with many assets has almost no unsystematic risk. Unsystematic risk is also called diversifiable risk.
Why is the beta of the market 1?
The beta of market portfolio is always one. Because beta measures the sensitivity of an asset to the movements of the overall market portfolio, and the market portfolio obviously moves precisely with itself, its beta is one.