Beta is a risk measure comparing the volatility of a stock's price movement to the general market.


Beta provides a good idea of a stock's inherent risk or sensitivity to general market fluctuations.


High beta stocks react strongly to variations in the market, and low beta stocks are less affected by market variations.

Calculating Beta

To calculate the 200-day Beta for a stock (in comparison to the S&P index), you would compute the 200 one-day percentage changes in S&P and the 200 one-day percentage changes in the stock. These calculations produce 200 ordered pairs that are then charted as a scatter graph, and the slope of the least-squares-fit line is the value for beta. (Alpha is the y-intercept of the least-squares-fit line.)