Beta of Stocks
Beta measures a stock’s risk relative to the broader market, which has a default Beta of 1. Stocks are categorized into four types based on Beta: High Beta Stocks (Beta > 1) are high-risk, high-reward, exhibiting greater volatility than the market. Low Beta Stocks (Beta < 1) are low-risk, low-reward, offering more stability. Negative Beta Stocks (Beta < 0) move inversely to the market, reducing portfolio risk. Stocks with Beta = 1 mirror the market’s movements, sharing its risk and return profile. Beta helps investors gauge a stock’s volatility and alignment with market trends.
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