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Beta

How much a stock tends to swing compared with the market as a whole.

Beta measures how much a stock's price has tended to move compared with the overall market. The market itself is given a beta of 1, and each stock is measured against that.

Picture it

+5%

−5%

Beta of 0.5

Calmer than the market

+10%

−10%

Beta of 1

Moves with the market

+20%

−20%

Beta of 2

Swings twice as hard

Above the line: the market rises 10%. Below the line: the market falls 10%.

What each made-up stock would be expected to do when the overall market moves 10%. Beta is measured from past behavior, so it describes a tendency, not a promise.

A stock with a beta of 1 has tended to move about as much as the market. A beta above 1 means bigger swings: a stock with a beta of 2 has tended to rise about twice as much as the market on good days and fall about twice as much on bad ones. A beta below 1 means smaller swings, which is common for steadier businesses like utilities.

Beta is calculated from past prices, so it describes how a stock has behaved, not how it will behave. It also only measures movement relative to the market — it says nothing about whether the company is a good business. Investors use it as a quick read on how bumpy a ride a stock is likely to be.