29 March 2022 14:33

What does a beta of 1.3 mean?

The market is described as having a beta of 1. The beta for a stock describes how much the stock’s price moves compared to the market. If a stock has a beta above 1, it’s more volatile than the overall market. For example, if an asset has a beta of 1.3, it’s theoretically 30% more volatile than the market.

What does a stock beta of 1.5 mean?

Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. [More precisely, that stock’s excess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return).]

What does a beta of 1.03 mean?

With a beta of 1.52, for example, Shopify is expected to be more volatile than the overall market, while at 1.03, Apple’s beta indicates its share fluctuations are expected to align closely with the stock market.

What does a beta higher than 1 mean?

Beta is calculated using regression analysis. A beta of 1 indicates that the security’s price tends to move with the market. A beta greater than 1 indicates that the security’s price tends to be more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market.

When the beta of the stock is 1.2 What does it mean?

A beta that is greater than 1.0 indicates that the security’s price is theoretically more volatile than the market. For example, if a stock’s beta is 1.2, it is assumed to be 20% more volatile than the market.

What is a good beta in stocks?

Beta is a concept that measures the expected move in a stock relative to movements in the overall market. A beta greater than 1.0 suggests that the stock is more volatile than the broader market, and a beta less than 1.0 indicates a stock with lower volatility.

What is the lowest beta stock?

Low Beta Dividend Stocks with High Yields

  • Phillips 66 Partners LP (NYSE:PSXP) Dividend Yield as of January 26: 8.18% …
  • Lumen Technologies, Inc. (NYSE:LUMN) …
  • Broadmark Realty Capital Inc. (NYSE:BRMK) …
  • DallasNews Corporation (NASDAQ:DALN) Dividend Yield as of January 26: 9.24% …
  • Chimera Investment Corporation (NYSE:CIM)

What does a beta of 1.23 mean?

A Beta of 1.23 means that; a 1% move in the index will result in a 1.23% movement in the stock price.

Is the market beta always 1?

The beta of market portfolio is always one. Because beta measures the sensitivity of an asset to the movements of the overall market portfolio, and the market portfolio obviously moves precisely with itself, its beta is one.

What is beta measured against?

Beta is a statistical measure of the volatility of a stock versus the overall market. A beta above 1 means a stock is more volatile than the overall market. A beta below 1 means a stock is less volatile than the overall market. The S&P 500, Dow Jones Industrial Average, and Nasdaq 100 are frequently used beta measures.

Which is more riskier beta or 1.2 Why?

A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security’s price will be more volatile than the market. For example, if a stock’s beta is 1.2, it’s theoretically 20% more volatile than the market” (2015).

What does a beta of 1.0 mean for an individual security?

What does a beta of 1.0 mean for an individual security? The security has the same amount of market risk as the market portfolio.

What is the average of beta values for all individual stocks?

an aggressive stock, expected to increase more than the market increases. The average of beta values for all individual stocks is: A. greater than 1.0; most stocks are aggressive.

What is a good PE ratio?

A higher P/E ratio shows that investors are willing to pay a higher share price today because of growth expectations in the future. The average P/E for the S&P 500 has historically ranged from 13 to 15. For example, a company with a current P/E of 25, above the S&P average, trades at 25 times earnings.

How do you calculate the beta of a stock?

Beta could be calculated by first dividing the security’s standard deviation of returns by the benchmark’s standard deviation of returns. The resulting value is multiplied by the correlation of the security’s returns and the benchmark’s returns.

What does a beta of 0 mean?

A beta value between 0 and 1 indicates that the stock is less volatile than the market as a whole, and a value greater than 1 indicates more volatility. A beta value of 0 means the stock’s performance is uncorrelated with the market. You may also see beta values below 0, indicated with a negative sign.

What does a beta of 0.7 mean?

A fund with a beta of 0.7 has experienced gains and losses that are 70% of the benchmark’s changes. A beta of 1.3 means the total return is likely to move up or down 30% more than the index.

Is beta a good measure of risk?

The underlying reason that beta is ineffective as an indicator of risk, or the potential for long-term loss of capital, is that beta is simply a measure of share price volatility. The true risk associated with a company is a result of its business fundamentals.

Is a beta of 0 good?

A zero-beta portfolio would have the same expected return as the risk-free rate. Such a portfolio would have zero correlation with market movements, given that its expected return equals the risk-free rate or a relatively low rate of return compared to higher-beta portfolios.

What is the beta of the market portfolio?

In finance, the beta (β or market beta or beta coefficient) is a measure of how an individual asset moves (on average) when the overall stock market increases or decreases. Thus, beta is a useful measure of the contribution of an individual asset to the risk of the market portfolio when it is added in small quantity.

What is the expected return on a security with beta of 1?

However, if the beta is equal to 1, the expected return on a security is equal to the average market return. A beta of -1 means security has a perfect negative correlation with the market.

Which is the beta for a treasury stock?

Treasury bill is often considered a risk-free asset, because it is of short maturity, highly liquid and virtually free of default risk. Therefore, the beta of the treasury bills is zero.