What is Beta?
Beta measures how much a stock’s price moves relative to the overall market (typically the S&P 500). A beta of 1.0 means the stock moves in lockstep with the market. A beta of 1.5 means the stock tends to move 50% more than the market — if the S&P 500 rises 10%, the stock tends to rise 15% (and vice versa for declines). A beta of 0.5 means the stock moves half as much as the market.
Beta is the most widely used measure of systematic risk — the risk you can’t diversify away by holding more stocks.
Why it matters for investors
Beta helps you understand the risk profile of your portfolio. High-beta stocks amplify both gains and losses. They’re exciting in bull markets and painful in bear markets. Low-beta stocks provide stability — they won’t rocket upward as fast, but they won’t crash as hard either.
Your ideal beta depends on your risk tolerance and investment timeline. Younger investors with decades ahead might embrace high-beta stocks for growth potential. Retirees drawing income might prefer low-beta stocks for stability.
How Stock Analyzer scores it
| Score | Beta Range | What it means |
|---|---|---|
| A | Below 1.0 | Less volatile than the market |
| B | 1.0 – 1.5 | Slightly more volatile than the market |
| C | 1.5 – 2.0 | Moderately volatile |
| D | 2.0 – 2.5 | High volatility |
| E | Above 2.5 | Very high volatility — significant price swings |
What to watch out for
Beta is calculated from historical price data, usually over 3-5 years. Past volatility doesn’t guarantee future behavior — a previously stable company can become volatile after a major event (earnings miss, management change, industry disruption). Also, beta measures price volatility, not business risk. A stock might have low beta because it’s thinly traded, not because the underlying business is stable. Always check fundamentals alongside beta.