Stock beta calculation - beta risk recommendation

A beta is a very useful ratio that is used to measure stock volatility in relation to the stock market. Beta is calculated for you in the stock reports. A whole stock market is usually given a beta of 1. Keep on reading if you want to learn how to seriously take advantage of stock beta calculation.

A stock with a beta higher than 1 means that it's very volatile and quite risky. If the beta is 1 or close to 1 it means it is as stable as the whole market itself and moves at the same pace. If it is below 1, it is not risky and even less volatile than the market itself.

The actual formula for stock beta calculation can be written as:

Beta = Covariance (stock versus market returns) / Variance of the Stock Market

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