Beta and CAPM Stock Risk Calculator
Calculate stock Beta using CAPM, or find expected return given Beta, risk-free rate, and market return.
Includes Beta interpretation guide.
What Is CAPM?
The Capital Asset Pricing Model (CAPM) describes the relationship between a stock’s risk and its expected return. It was developed in the 1960s by William Sharpe (who won the Nobel Prize in Economics in 1990 for this work).
The CAPM Formula
Expected Return = Rf + β × (Rm − Rf)
Where:
- Rf = Risk-Free Rate (typically the 10-year US Treasury yield)
- β = Beta (the stock’s sensitivity to market movements)
- Rm = Expected Market Return (historically ~10% for the US S&P 500)
- (Rm − Rf) = Market Risk Premium
Solving for Beta
If you know the expected return, you can solve for Beta: β = (R − Rf) ÷ (Rm − Rf)
Interpreting Beta
| Beta Value | Meaning | Example Sectors |
|---|---|---|
| Negative | Moves opposite to the market | Gold, some inverse ETFs |
| 0 | No correlation with the market | Cash, T-bills |
| 0.0 – 0.5 | Much less volatile than the market | Utilities, regulated telecoms |
| 0.5 – 0.8 | Less volatile than the market | Consumer staples, healthcare |
| 0.8 – 1.2 | Moves roughly with the market | Diversified indices, banks |
| 1.2 – 1.8 | More volatile than the market | Technology, semiconductors |
| Over 1.8 | Much more volatile, high risk and reward | Speculative growth stocks |
Typical Beta Values
- Apple (AAPL): ~1.2
- Johnson & Johnson (JNJ): ~0.5
- Tesla (TSLA): ~1.8–2.0
- Exxon Mobil (XOM): ~0.7
- Duke Energy (DUK): ~0.3
Limitations of Beta
Beta is backward-looking — it is calculated from historical data and may not predict future volatility. It also ignores company-specific (unsystematic) risks that can be diversified away in a portfolio.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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