Stock Beta Calculator

Beta measures how much a stock moves relative to the overall market. A beta of 1 means the stock historically tracks the market closely. A beta of 1.5 means a 10% market move typically produces a 15% move in the stock – more volatile, higher potential returns but bigger drawdowns. Beta near zero means little correlation with market swings. Negative beta is rare but real: some assets like long-dated Treasuries or certain commodity producers run negative beta during equity bear markets.

Two equivalent ways to calculate beta:

From correlation: beta = rho * (sigma_stock / sigma_market)

rho is the Pearson correlation coefficient between the stock and market returns over the chosen history. sigma is standard deviation of returns over the same period. If a stock has sigma = 25% and the S&P 500 has sigma = 15%, with correlation 0.7, then beta = 0.7 x (25/15) = 1.17.

From covariance: beta = Cov(stock, market) / Var(market)

Mathematically identical, and more direct if you have regression output from a spreadsheet.

Beta feeds into the Capital Asset Pricing Model (CAPM):

E(r) = rf + beta x (rm - rf)

rf is the risk-free rate (typically the 3-month T-bill yield). rm is the expected market return (historical S&P 500 average is roughly 10% nominal, 7% real). The term (rm - rf) is the equity risk premium – the extra return demanded for taking on market risk rather than holding the risk-free asset.

Note: beta is backward-looking and unstable. A beta estimated over 2019-2021 data can look very different from one estimated over 2022-2024. Always check the estimation period before using beta in a decision.