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| Beta |
Beta is a measure of a stock�s price volatility relative to the overall market. It is most often calculated using a stock's movements relative to the S&P 500 Index over the trailing 12-month period.
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A stock with a beta of 1.00 will tend to move higher and lower in tandem with the S&P 500. Securities with a beta greater than 1.00 tend to be more volatile than the S&P 500, and those with betas below 1.00 tend to be less volatile than the underlying index. Securities with betas of zero generally move independently of the overall market. And finally, stocks with negative betas tend to move in the opposite direction relative to the broader market. When the S&P tumbles, stocks with negative betas will move higher, and vice versa.
For example:
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Beta |
Volatility vs. S&P 500 |
Description |
| 2.50 | 150% | A beta of 2.50 represents stock price movement that is 150% more volatile than the S&P 500 Index. |
| 1.00 | 0% | A beta of 1.00 represents stock price movement that has the same volatility as the S&P 500 Index. |
| 0.50 | 50% | A beta of 0.50 represents stock price movement that is half as volatile as the S&P 500 Index. |
| -0.50 | 50% | A beta of -0.50 represents stock price movement that is half as volatile of the S&P 500 Index, but the stock price tends to move in the opposite direction. |
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