Beta Coefficient
The Beta coefficient measures a stock’s volatility relative to the market, aiding investors in assessing risk. It’s calculated as Beta (β) = Covariance (Ri, Rm) / Variance (Rm), where Ri is the stock’s return, Rm is the market’s return, Covariance tracks their co-movement, and Variance measures market return fluctuations. Beta types include: Beta < 1.0 (less volatile than the market), Beta = 1.0 (matches market volatility), Beta > 1.0 (more volatile), and Negative Beta (moves opposite the market). This helps gauge how a stock reacts to market swings.
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