Beta

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The Beta measures the amount that investors expect the stock price to change for each additional 1% change in the market. The average beta of all stocks is 1.0. A stock with a beta lower than 1.0 is unusually insensitive to market movements. A stock with a beta > 1.0 is above average sensitive to market movements.

The formula for beta is:

=

Where is the Covariance@math between the stocks returns and the market returns and is the variance of returns in the market.