Beta (β)

Risk & Portfolio

Updated Apr 2026 • Has calculator

Measures a stock's sensitivity to market movements — how much it tends to rise or fall relative to the overall market.

What is Beta?

Beta is a measure of a stock's systematic (market) risk relative to a benchmark, typically the S&P 500. A beta of 1.0 means the stock has historically moved in line with the market. A beta above 1.0 (aggressive) indicates the stock amplifies market moves — a stock with beta 1.5 tends to rise 15% when the market rises 10%, and fall 15% when the market falls 10%. A beta below 1.0 (defensive) suggests the stock is less sensitive to market swings; a negative beta means it tends to move opposite the market. Beta measures only systematic risk; idiosyncratic (company-specific) risk is not captured. In CAPM, beta is the sole driver of expected return differences across stocks.

Formula

β = Cov(Stock, Market) / Var(Market)

Worked Example

Annual returns 2019–2023

Step 1 NVDA annual returns (%): 76.9, 122.3, 125.5, −50.3, 239.0

Step 2 S&P 500 annual returns (%): 31.5, 18.4, 28.7, −18.1, 26.3

Step 3 Cov(NVDA, SPX) ≈ 1,140; Var(SPX) ≈ 562

Step 4 β = 1,140 / 562 ≈ 2.03

Step 5 → NVDA historically moved ~2× as much as the S&P 500 in both directions

Source: SEC EDGAR — NVDA Annual Reports (2024-02-21)

Calculate Beta

Stock Returns (%)

Enter comma-separated stock period returns

Market Returns (%)

Enter comma-separated market (e.g. S&P 500) returns for the same periods

Beta

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Not investment advice.

How to Interpret Beta

< 0

Negative Beta — moves opposite the market (e.g. inverse ETFs)

0 – 0.8

Defensive (β < 0.8) — less volatile than the market

0.8 – 1.2

Market-like (β ≈ 1.0) — moves in line with the index

> 1.2

Aggressive (β > 1.2) — amplifies market moves

📚 Risk Metrics — Complete the path

Sources