Beta Coefficient
The Beta coefficient measures a stock’s volatility relative to the market, aiding investors in assessing risk. It’s calculated as Beta (β) = Covariance (Ri, Rm) / Variance (Rm), where Ri is the stock’s return, Rm is the market’s return, Covariance tracks their co-movement, and Variance measures market return fluctuations. Beta types include: Beta < 1.0 (less volatile than the market), Beta = 1.0 (matches market volatility), Beta > 1.0 (more volatile), and Negative Beta (moves opposite the market). This helps gauge how a stock reacts to market swings.
Related Terms
Alpha
Alpha is a performance metric that measures how much a stock or portfolio has outperformed...
Returns Direct
Direct mutual fund plans generally offer higher returns than regular plans, even though both invest...
Gamma
Gamma (Γ) is a second-order derivative that measures the rate of change of an option's...
Delivery Notice
A delivery notice is a formal document issued by the seller in a commodity futures...
Long Strangle
A long strangle is an options strategy where a trader buys a call option and...
Convertible Debentures
A convertible debenture is a long-term debt instrument that can transform into equity shares upon...
