Beta

Market Mechanics

Beta is a coefficient that shows how much a stock has moved relative to the overall market, usually the S&P 500.

A beta of 1 means it has moved in line with the market on average, above 1 more sharply, below 1 more calmly. It is calculated from past returns, changes from period to period, and does not capture moves driven by the company's own news.

Example

A stock with a beta of 1.5 has tended to fall about 3% on average when the market fell 2%.

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