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To calculate beta, investors divide the covariance of an individual stock (say, Apple) with the overall market, often represented by the Standard & Poor’s 500 Index, by the variance of the ...
Beta measures how volatile a stock is in relation to the broader stock market over time. A stock with a high beta indicates it's more volatile than the overall market and can react with dramatic ...
But if high-beta stocks are risky and low-beta. Investors always want great returns with minimal risk. One way that stock analysts measure risk is by looking at what's known as beta values, with ...
Beta is the hedge ratio of an investment with respect to the stock market. For example, to hedge out the market-risk of a stock with a market beta of 2.0, an investor would short $2,000 in the stock market for every $1,000 invested in the stock. Thus insured, movements of the overall stock market no longer influence the combined position on ...
If a stock has a beta of 1.2, it might be considered 20 percent riskier than the benchmark and therefore should compensate investors with a higher expected return. If the index returned 10 percent ...
The Capital Asset Pricing Model posits that individual stock returns move with the overall stock market symmetrically, i.e., that their upside and downside betas are identical. The dual-beta model attempts to differentiate downside risk (risk of loss) from upside risk (gain), both measured in terms of beta with respect to the market and not ...
What Is a Good Beta for a Stock? There is no such thing as an empirically “good” or “bad” beta for a stock. The type of beta you want for your portfolio depends on the type of investor you ...
To help prevent this, we suggest that investors consider a stock’s beta (a common measure of stock volatility) when purchasing a stock. The higher the beta, the more volatile it can be relati.