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In finance, the beta (β or market beta or beta coefficient) is a statistic that measures the expected increase or decrease of an individual stock price in proportion to movements of the stock market as a whole. Beta can be used to indicate the contribution of an individual asset to the market risk of a portfolio when it is
Continue reading → The post How to Calculate the Beta of a Portfolio appeared first on SmartAsset Blog. Investors, whether beginner or seasoned professionals, all have a threshold for risk. Some ...
[] / [] is the "beta", return mentioned — the covariance between the asset's return and the market's return divided by the variance of the market return — i.e. the sensitivity of the asset price to movement in the market portfolio's value (see also Beta (finance) § Adding an asset to the market portfolio).
The rate of return on a portfolio can be calculated indirectly as the weighted average rate of return on the various assets within the portfolio. [3] The weights are proportional to the value of the assets within the portfolio, to take into account what portion of the portfolio each individual return represents in calculating the contribution of that asset to the return on the portfolio.
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 ...
How to calculate beta Beta is calculated by taking the covariance between the return of an asset and the return of the market and dividing it by the variance of the market.