📊 Tesla's beta is 2.0 — meaning it moves 2× the market. Coca-Cola's beta is 0.6 — a defensive anchor. Beta tells you how much risk you're actually taking. Calculate it from real returns data or estimate it for your whole portfolio. Why risk-adjusted returns matter →
Beta Calculator
Calculate stock beta from returns data, estimate beta quickly, and compute weighted portfolio beta. Understand the beta coefficient and how to use it in the CAPM model.
1.00
S&P 500 Beta
~1.2
Avg Tech Sector Beta
~0.4
Avg Utilities Beta
36-60
Months Used Typically
Stock Beta Calculator
Enter comma-separated monthly returns for both the stock and the market index (e.g., S&P 500). The calculator computes beta using covariance/variance, plus R-squared and Jensen's alpha.
📈 Returns Data
📊 Results
Beta (β)—
R-squared—
Alpha (annualized)—
Stock Avg Return—
Market Avg Return—
Observations—
Quick Beta Estimate
Don't have raw returns data? Estimate beta using the shortcut formula: β = (σ_stock / σ_market) × ρ, where σ is standard deviation and ρ is the correlation coefficient.
⚡ Quick Estimate Inputs
📊 Quick Estimate Result
Estimated Beta (β)—
Volatility Ratio (σs/σm)—
Interpretation—
β = (σstock / σmarket) × ρ
Beta Interpretation Guide
Beta tells you how volatile a stock is compared to the market. Use the gauge below to visualize where any beta value falls on the risk spectrum.
🎯 Beta Risk Spectrum
<0 Inverse
0–0.5 Low Vol
0.5–1.0 Defensive
1.0
1.0–1.5 Aggressive
>1.5 High Vol
Market
Portfolio Beta Calculator
Enter up to 10 stocks with their portfolio weights and individual betas to calculate your portfolio's weighted beta. Portfolio Beta = Σ(weight × beta).
💼 Portfolio Holdings
Stock / TickerWeight (%)Beta
Portfolio Beta—
Total Weight—
Interpretation—
Number of Holdings—
Beta vs. Return — Major Stocks & Sectors
This scatter plot shows the relationship between beta and annualized return for the Magnificent 7 stocks and key sector benchmarks. Higher beta generally implies higher expected returns — but also higher risk.
📉 Beta vs. Annualized Return
Average Beta by S&P 500 Sector
Different sectors carry different levels of systematic risk. Technology and Consumer Discretionary tend to have higher betas, while Utilities and Consumer Staples are typically defensive.
📊 Average Sector Beta (S&P 500)
What Is Beta in Stocks?
Beta (β) is a measure of a stock's systematic risk — how much it tends to move relative to the overall market. It is a cornerstone of the Capital Asset Pricing Model (CAPM), which describes the relationship between risk and expected return:
E(Rᵢ) = Rꜰ + βᵢ × (E(Rₘ) - Rꜰ)
Where E(Rᵢ) is the expected return of the stock, Rꜰ is the risk-free rate, βᵢ is the stock's beta, and E(Rₘ) is the expected market return. The term (E(Rₘ) - Rꜰ) is the equity risk premium.
How to Calculate Beta (Beta Formula)
Beta is mathematically defined as:
β = Cov(Rₛ, Rₘ) / Var(Rₘ)
This is equivalent to running a linear regression of stock returns against market returns. The slope of the regression line is beta. The R-squared value tells you how much of the stock's variance is explained by the market (systematic risk vs. unsystematic risk).
Systematic vs. Unsystematic Risk
Systematic risk (market risk) affects all stocks — recessions, interest rate changes, geopolitical events. Beta measures this. Unsystematic risk (company-specific risk) includes things like management changes, product recalls, or lawsuits. Unsystematic risk can be diversified away; systematic risk cannot. This is why CAPM only rewards investors for bearing systematic risk.
Limitations of Beta
While beta is widely used, it has important limitations that investors should understand:
Backward-looking: Beta is calculated from historical data (typically 36-60 months). Past volatility patterns may not persist, especially after major business changes, M&A activity, or shifts in company strategy.
Changes over time: A company's beta can shift significantly as its business mix evolves. Tesla's beta has ranged from 1.5 to 2.5+ over different periods. Relying on a single point estimate can be misleading.
Assumes normal distributions: Beta is derived from variance and covariance, which assume returns are normally distributed. In reality, stock returns exhibit fat tails — extreme events (crashes, squeezes) occur more frequently than a normal distribution predicts.
Doesn't capture tail risk: A stock with a "moderate" beta of 1.0 could still lose 50% in a black swan event. Beta tells you about average co-movement, not worst-case scenarios.
Benchmark dependency: Beta is always relative to a benchmark. A stock's beta against the S&P 500 will differ from its beta against the NASDAQ or a global index. The choice of benchmark matters.
How to Use Beta in Investing
Position Sizing
Beta helps determine how much capital to allocate to a position. If you want equal risk contribution from each holding, allocate less to high-beta stocks and more to low-beta stocks. For example, a stock with beta 2.0 contributes twice the market risk of a stock with beta 1.0 — so you might hold half as much.
Hedging
To hedge a portfolio with futures or index puts, you need to know your portfolio beta. If your $100,000 portfolio has a beta of 1.3, you'd need $130,000 notional in S&P 500 short futures to be fully hedged — because your portfolio moves 1.3x the market.
Portfolio Construction
By combining high-beta and low-beta stocks, you can target a specific overall portfolio beta. A retiree might target a portfolio beta of 0.6 for lower volatility, while a young aggressive investor might accept a beta of 1.3+ for amplified returns. Our portfolio beta calculator above helps you fine-tune this.
5 Key Beta Insights
Beta of 1.0 is the benchmark. The S&P 500 always has a beta of 1.0 by definition. Every stock's beta is measured relative to it. A beta above 1.0 amplifies market moves; below 1.0 dampens them.
High beta ≠ high quality. A stock with beta 2.0 will double your gains in a bull market — but also double your losses in a bear market. Tesla (β ~2.0) returned 1,100%+ from 2020-2021, then fell 65% in 2022.
Sector matters more than you think. Over 60% of a stock's beta is explained by its sector. Utilities stocks almost always have low betas (0.3-0.5), while tech stocks cluster around 1.1-1.5, regardless of company-specific fundamentals.
Negative beta is rare but real. Gold miners and certain inverse ETFs can have negative betas, meaning they tend to rise when the market falls. This makes them useful portfolio hedges, but they underperform in sustained bull markets.
Blended Adjusted Beta provides a better forward estimate. Bloomberg and many analysts use "adjusted beta" = (0.67 × Raw Beta) + (0.33 × 1.0), which assumes betas revert toward 1.0 over time. This typically gives more accurate forward-looking estimates.
Frequently Asked Questions
What is beta in stocks? ▼
Beta (β) measures a stock's volatility relative to the overall market (typically the S&P 500). A beta of 1.0 means the stock moves in line with the market. A beta above 1.0 indicates higher volatility — for example, a beta of 1.5 means the stock tends to move 50% more than the market. A beta below 1.0 indicates lower volatility.
How do you calculate beta? ▼
Beta is calculated as the covariance of stock returns and market returns divided by the variance of market returns: β = Cov(Rₛ, Rₘ) / Var(Rₘ). Alternatively, you can estimate beta as (Stock Std Dev / Market Std Dev) × Correlation. Regression analysis of historical returns is the most common method, typically using 36-60 months of data.
What is a good beta for a stock? ▼
There is no universally "good" beta — it depends on your investment goals. Conservative investors prefer low-beta stocks (0.5-0.8) like utilities and consumer staples for stability. Growth-oriented investors may favor high-beta stocks (1.2-1.5+) like tech stocks for amplified returns. A balanced portfolio often targets an overall beta near 1.0.
What is portfolio beta and how do you calculate it? ▼
Portfolio beta is the weighted average of the individual betas of all stocks in a portfolio. You calculate it by multiplying each stock's beta by its weight (proportion of portfolio value), then summing the results: Portfolio Beta = Σ(wᵢ × βᵢ). For example, a portfolio with 50% in a stock with beta 1.2 and 50% in a stock with beta 0.6 has a portfolio beta of 0.9.
What are the limitations of beta? ▼
Beta has several limitations: it is backward-looking and based on historical data that may not predict future volatility; it changes over time as company fundamentals evolve; it assumes returns are normally distributed and doesn't capture tail risk or black swan events; and it only measures systematic (market) risk, ignoring company-specific risks like fraud or product failures.