Beta measures a stock's volatility relative to the overall market (S&P 500 = beta of 1). Stocks with beta > 1 are more volatile than market (a beta-1.5 stock moves 1.5% for every 1% market move); beta < 1 stocks are less volatile (utilities often 0.5-0.7). Negative beta is rare (gold sometimes). Beta is calculated from historical price movements over a defined period. High-beta portfolios offer higher expected returns with higher volatility — appropriate for long horizons. Low-beta portfolios offer stability for shorter horizons. Beta only captures market correlation; idiosyncratic risk (company-specific) requires diversification.
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Beta
August 22, 2026 · Aditya Gupta
Investing
Related terms
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A 401(k) is an employer-sponsored retirement plan where employees contribute pre-tax salary that grows tax-deferred until withdrawal. The…
Active Management
Active management is the attempt to outperform a benchmark through stock selection, sector rotation, market timing, or any…
Alpha
Alpha is excess return relative to a benchmark, adjusted for risk (beta). Positive alpha means an investment outperformed…
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Asset allocation is the percentage split of your portfolio across asset classes — typically stocks, bonds, and cash,…
Backdoor Roth
The Backdoor Roth is a strategy for high earners (above the Roth IRA income limit) to contribute to…
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