Protecting Capital
October 4, 2016

Beta

Written by PenderFund

Beta is a measure that investors can use when assessing a potential investment for volatility. Beta measures correlation to the market (or a benchmark) and how susceptible a stock or fund is to the fluctuations of the general stock market. 

If you assume that the investible universe or market has a beta of 1, then a stock with a beta of 1.1 means it is 10% more volatile than the market and a shift, up or down, of 100 basis points by the market will see a shift of 110 basis points by the stock in question. A stock with a beta below 1 means that the stock has a lower tendency to fluctuate with markets.