Portfolio Beta Calculator

What is Portfolio Beta?

Beta (β) measures how much a stock or portfolio moves relative to the overall market. A portfolio beta of 1.0 means it moves in lockstep with the market. Above 1.0 means it amplifies market moves; below 1.0 is more defensive.

Formula: β_portfolio = Σ (w_i × β_i)

Where:

• w_i = weight of stock i in the portfolio (as a decimal, e.g. 0.40 for 40%)
• β_i = beta of stock i
• Σ = sum across all holdings
• Weights should sum to 100%

Reading the result:

• β below 0: moves opposite the market (gold miners at times, inverse ETFs by design)
• β of 0: no correlation with the market (cash, some short-duration bonds)
• β of 0.5: half the market’s volatility, defensive
• β of 1.0: matches the market exactly
• β of 1.5: 50% more volatile than the market
• β above 2.0: very aggressive, high-volatility holding

Worked example. Four holdings, $100,000 portfolio:

Each contribution is weight × beta, and the portfolio beta is their sum: 1.090. A 10% market drop would be expected to take roughly 10.9% off this portfolio, or about $10,900 of the $100,000. That expectation is not a forecast. Beta explains only the part of a stock’s move that comes from the market, and for a single company that part is often less than half of the total variance.

Where to find beta: Beta is published by most financial sites (Yahoo Finance, Bloomberg, Morningstar). It is typically calculated over 36 to 60 months of monthly returns against the S&P 500. Beta changes over time as a company’s business mix and leverage change, so the number you look up today is a description of the past few years, not a property of the stock.

Beta and CAPM: The Capital Asset Pricing Model (CAPM) uses beta to estimate expected return: Expected Return = Risk-Free Rate + β × (Market Return − Risk-Free Rate)

At a 4% risk-free rate and an 8% expected market return, the 1.09 portfolio above works out to 4% + 1.09 × 4% = 8.36%. Fill in the two optional rate fields and the calculator does this for you.

A note on the weights. If your entries add up to less than 100%, the rest of the account is presumably cash, and cash has a beta of 0. That drags the portfolio beta down. The calculator reports both readings when the weights fall short: the normalized figure (what the invested portion looks like) and the cash-inclusive figure (what your whole account actually experiences). They are different numbers and the second one is the one that shows up in your statement.

Portfolio construction: Conservative investors target portfolio β below 0.8. Aggressive growth investors may accept β above 1.3. Adding low-correlation assets pulls portfolio beta toward zero, which is the mathematical version of the advice everyone gives about diversification.