Stock Beta Calculator
Calculate a stock's beta — a measure of how much it moves relative to the overall market. Beta is the covariance between the stock's returns and the market's returns divided by the variance of the market's returns. Enter those two figures to get the beta and what it means for volatility.
Formula
Beta = Covariance(Stock, Market) ÷ Variance(Market)
- Beta = covariance of the stock's returns with the market's returns, divided by the variance of the market's returns.
- Beta = 1 means the stock tends to move in line with the market.
- Beta > 1 means it's more volatile than the market (amplifies market moves); beta < 1 means it's less volatile.
- A negative beta would mean the stock tends to move opposite to the market.
- Beta measures systematic (market) risk and is a key input to the Capital Asset Pricing Model (CAPM).
Covariance 0.018, market variance 0.012
Inputs
- Covariance (Stock, Market): 0.018
- Market Variance: 0.012
Beta = 0.018 ÷ 0.012 = 1.5. The stock is 50% more volatile than the market — expect it to rise or fall about 1.5% for every 1% market move.
Frequently asked questions
What is stock beta?
Beta measures how much a stock moves relative to the overall market. A beta of 1 moves with the market; above 1 is more volatile, below 1 is less volatile.
How is beta calculated?
Divide the covariance between the stock's returns and the market's returns by the variance of the market's returns.
What does a beta above 1 mean?
The stock amplifies market movements — it tends to gain more in rallies and lose more in downturns than the market average.
Why does beta matter for investors?
It quantifies market-related (systematic) risk and feeds into the CAPM to estimate the expected return required for that level of risk.