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Investors always want great returns with minimal risk. One way that stock analysts measure risk is by looking at what's known as beta values, with higher betas representing more volatile stocks.
To calculate beta, investors divide the covariance of an individual stock (say, Apple) with the overall market, often represented by the Standard & Poor’s 500 Index, by the variance of the ...
Beta is the hedge ratio of an investment with respect to the stock market. For example, to hedge out the market-risk of a stock with a market beta of 2.0, an investor would short $2,000 in the stock market for every $1,000 invested in the stock. Thus insured, movements of the overall stock market no longer influence the combined position on ...
For example, if a stock tends to show varying returns that are 50% greater than the movements of the overall market, that stock will have a beta of 1.5. The overall market has a beta of 1.0, as it ...
Security market line (SML) is the representation of the capital asset pricing model. It displays the expected rate of return of an individual security as a function of systematic, non-diversifiable risk. The risk of an individual risky security reflects the volatility of the return from the security rather than the return of the market portfolio.
In investing, downside beta is the beta that measures a stock's association with the overall stock market only on days when the market’s return is negative.Downside beta was first proposed by Roy 1952 [1] and then popularized in an investment book by Markowitz (1959).