π Stock Beta Calculator
How much market moves your stock.
Volatility relative to the market
Estimates for planning only, not financial advice.
Beta measures how much a stock moves with the market: covariance of the stock's returns with the market's, divided by the market's variance. With covariance of 0.0042 and market variance of 0.0035, beta is 1.20, so the stock tends to swing 20 percent more than the market in both directions. Plug that beta into CAPM with a 4 percent risk-free rate and 9 percent expected market return, and the required return is 10 percent: 4% + 1.2 x (9% - 4%).
How to Use This Calculator
Use the covariance tab when you have the statistics, or paste monthly return series for the stock and the market and the calculator derives them. Add the risk-free rate and expected market return to see the CAPM required return for the computed beta.
Choose the input method. For return series, paste equal-length lists of periodic returns in percent; monthly data over 2 to 5 years is standard.
Enter the risk-free rate (Treasury yield) and your expected market return for the CAPM line.
Read beta, the CAPM required return, and the interpretation. Compare against published betas to sanity-check your series; big gaps mean different periods or markets.
The Formulas
Beta is a regression slope: plot the stock's returns against the market's, and beta is the line's steepness. CAPM then prices risk: you earn the risk-free rate plus beta-scaled compensation for market risk. A beta of 1.2 demands 10 percent when the market offers 9 and cash pays 4; if the stock cannot plausibly deliver 10 percent, it is overpriced at current levels.
Worked Example: Beta 1.20
Covariance (stock, market): 0.0042. Market variance: 0.0035. Beta = 0.0042 / 0.0035 = 1.20. Interpretation: the stock moves about 20 percent more than the market; a 10 percent market rally suggests roughly a 12 percent move in the stock, and a 10 percent selloff suggests roughly 12 percent down.
CAPM: risk-free 4%, expected market 9%. Required return = 4% + 1.20 x 5% = 10.0%. If your analysis says the stock will return 12 percent, it compensates for its risk with 2 points of alpha; if it will return 8 percent, you are taking market-plus risk for less than market compensation, a bad trade you can see before making it.
Reading Beta Values
| Beta | Meaning | Typical holders |
|---|---|---|
| Below 0 | Moves against the market (rare) | Hedges, some gold miners |
| 0 to 0.7 | Defensive, muted moves | Utilities, consumer staples |
| 0.7 to 1.3 | Market-like | Most large caps |
| Above 1.3 | Aggressive amplifier | Tech growth, small caps |
Sector explains most beta: regulated utilities sit low, cyclical tech sits high. A utility with beta 1.5 or a tech stock with beta 0.6 deserves a second look at the data before the thesis, because the anomaly is usually measurement, not discovery.
Beta's Limits
Beta is backward-looking, regime-dependent, and blind to everything but market co-movement. It missed every fraud, every balance-sheet collapse, every product disaster in history, because those are idiosyncratic risks. It shifts with borrowing: a company that borrows heavily raises its equity beta without changing its business. And estimated betas wobble with the sample: 2-year versus 5-year windows routinely disagree by 0.2 to 0.3.
Use beta for what it does well: sizing market exposure, setting required returns in CAPM, and building a portfolio with a deliberate risk level. Do the company-specific work separately: earnings quality via our accrual ratio calculator, distress risk via the Altman Z-score, and expected compounding via the compound interest calculator. Beta tells you the ride's intensity; the rest tells you whether the ride is worth taking.
Portfolio Beta and Hedging
Portfolio beta is the weighted average of its holdings' betas, which makes it a practical risk dial. A $500,000 portfolio with a beta of 1.3 behaves like $650,000 of market exposure; trimming high-beta positions or adding bonds walks it down. Target-date funds glide the portfolio beta down with age for exactly this reason: the risk dial turns as the horizon shortens.
Beta also enables hedging. Shorting index futures against a high-beta portfolio neutralizes market exposure while keeping stock selection: a $1 million portfolio at beta 1.2 needs $1.2 million of index short to go market-neutral. The low-volatility anomaly complicates the story: historically, low-beta stocks have delivered better risk-adjusted returns than the classic model predicts, suggesting the market overpays for beta excitement. Use beta to measure and manage risk, not as a return forecast.
One caution: beta is estimated from past co-movement, and relationships change. A stock's beta can shift after acquisitions, borrowing changes, or business pivots, and 2-year versus 5-year estimation windows routinely disagree. Re-estimate with recent data before hedging real money, and never treat a published beta as a physical constant. It is a measurement of history, useful for risk budgeting and hedging, but history is all it is.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is stock beta?
Beta measures a stock's volatility relative to the market: beta = covariance(stock, market) / variance(market). A stock with covariance 0.0042 and market variance 0.0035 has a beta of 1.20, meaning it tends to move 20% more than the market in either direction. Beta of 1 matches the market; above 1 amplifies it; below 1 dampens it.
What is the beta formula?
Beta = Cov(Rs, Rm) / Var(Rm), where Rs is the stock's returns and Rm is the market's returns. In practice, beta is the slope of the regression line when you plot the stock's returns against the market's. This calculator accepts covariance and variance directly, or you can paste return series and it computes them.
What does a beta of 1.5 mean?
The stock tends to move 1.5 times the market: up 15% when the market rises 10%, down 15% when it falls 10%. High-beta stocks outperform in rallies and suffer in selloffs. A beta of 0.5 means half the market's moves; a negative beta (rare) means the stock tends to move opposite the market.
Is high beta good or bad?
Neither; it is a preference and a forecast combined. High beta boosts returns in bull markets and magnifies losses in bears, so it suits aggressive investors with strong stomachs and long horizons. Low beta suits income and capital-preservation goals. The mistake is holding high beta without realizing it, then panicking in the first drawdown.
How is beta used in CAPM?
The capital asset pricing model prices expected return as: expected return = risk-free rate + beta x (market return - risk-free rate). With a 4% risk-free rate, 9% expected market return, and beta 1.2, the required return is 4% + 1.2 x 5% = 10%. Beta is the risk input that scales the market risk premium to the stock.
Where do I find a stock's beta?
Yahoo Finance, Morningstar, and broker platforms publish betas, usually computed against the S&P 500 over 2 to 5 years of monthly returns. Different sources give different betas because they use different periods and markets; a 3-year monthly beta and a 5-year weekly beta for the same stock can differ by 0.3 or more. Know the methodology before comparing.
Can beta change over time?
Yes, constantly. Borrowing changes it (debt raises equity beta), business mix changes it (acquisitions, divestitures), and market regimes change measured beta even when the business is steady. A beta from 2021's market may misdescribe the stock in 2026. Recompute with recent data for decisions, not just screening.
What is a good beta for a portfolio?
Match it to the goal: near 1.0 for market-like behavior, below 1.0 (0.7-0.9) for a defensive tilt, above 1.0 for aggression. Portfolio beta is the weighted average of holdings' betas, so you can tune it precisely. Retirees drawing income usually want portfolio beta under 1; young accumulators can reasonably run above it.
Does beta measure all risk?
No, only systematic (market) risk. A stock can have beta of 1.0 and still go to zero on fraud, or triple on a buyout: that is idiosyncratic risk, which beta ignores and diversification removes. Beta tells you how the stock dances with the market; it says nothing about whether the company is any good.
What is alpha vs beta?
Beta is return from market exposure; alpha is return from skill or luck beyond what beta explains. A fund up 15% in a year the market rose 10% with beta 1.0 has roughly 5% alpha. Investors pay active fees for alpha and can get beta nearly free through index funds, which is why separating the two matters.