Beta

Also called: volatility, market risk

How much a share tends to move compared with the whole market (the S&P 500).

Formula

Beta = Covariance(share returns, market returns) ÷ Variance(market returns)

Worked example

1. 1. Take the share's returns and the market's returns over the same periods (typically 5 years of monthly returns).
2. 2. Covariance measures how they move together; variance measures how much the market moves on its own.
3. 3. Dividing the two gives beta = 1.15.

Result: 1.15

How to read it

Beta 1 means it moves with the market. Above 1 means bigger swings (beta 1.15 → if the market moves 10%, this share has historically moved about 12%). Below 1 means steadier. Beta looks backwards and can change.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)