Is a beta of 2 risky?
Stocks with beta coefficients greater than 1 generally bear greater risk (more volatility) than the market, whereas stocks with beta coefficients less than 1 are less risky (less volatile) than the overall market.
Say your benchmark, or the market to which you're comparing a stock, is the S&P 500. If the stock you're analyzing has a beta of 2, that means the stock is twice as volatile as the market. If the S&P 500 goes up by 10% next year, you can expect the stock price to go up by 20%.
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.
Say a company has a beta of 2. This means it is two times as volatile as the overall market. We expect the market overall to go up by 10%. That means this stock could rise by 20%. On the other hand, if the market declines 6%, investors in that company can expect a loss of 12%.
A β of less than 1 indicates that the security is less volatile than the market as a whole. Similarly, a β of more than 1 indicates that the security is more volatile than the market as a whole. Companies in certain industries tend to achieve a higher β than companies in other industries.
Just like beta, stocks with fast beta greater than 1.0 are more volatile than the market, whereas those with lower fast beta are less volatile. In short, if a security has a fast beta of 2, and the market is down 10%, the security is expected to be down 20%.
If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks tend to be riskier but provide the potential for higher returns. Low-beta stocks pose less risk but typically yield lower returns.
On the other hand, a fund with a beta of 2.4 would be expected to move 2.4 times more than its corresponding index. So if the S&P 500 moved 10%, the fund would be expected to rise 24%, and if the S&P 500 declined 10%, the fund would be expected to lose 24%.
What Is a Good Beta Value for a Stock? Whether or not a stock has a “good†beta value depends on what you are looking for in a stock. If you're risk averse, then look for a stock with a beta value at or below 1.0. If you're looking for something more exciting, then consider a stock with a value of above 2.0.
A beta value that is less than 1.0 means that the security is theoretically less volatile than the market. Including this stock in a portfolio makes it less risky than the same portfolio without the stock. For example, utility stocks often have low betas because they tend to move more slowly than market averages.
Is a lower beta less risky?
They noted that the research has shown that high-beta stocks are riskier and more likely to be junk stocks, while low-beta stocks are less risky and more likely to be quality stocks.
Low Beta. A beta lower than one suggests that a stock is less risky than the market. A beta of . 5 suggests that the stock is 50% less volatile than the market. Adding this type of stock to a portfolio lowers the overall risk but has a similar effect on potential return.
A beta value greater than 1.0 indicates the highly volatile nature of the security's price. For instance, a stock is thought to be 20% more volatile than the market if its beta is 1.2. Small-cap and technology stocks frequently have betas larger than the market benchmark.
A beta of 1.5 is considered to be a high beta stock. This is because a beta greater than 1 indicates that the stock is more volatile than the market, and therefore carries a greater level of risk.
This beta value shows security price volatility higher than market. So a beta value of 1.4 would indicate that the volatility of the stock is 40% higher than market. Adding this stock to your portfolio will cause risk to increase.
The risk-free rate of return is the interest rate an investor can expect to earn on an investment that carries zero risk. In practice, the risk-free rate is commonly considered to be equal to the interest paid on a 10-year highly rated government Treasury note, generally the safest investment an investor can make.
By definition, the market as a whole has a beta of 1, and everything else is defined in relation to that: Stocks with a value greater than 1 are more volatile than the market, meaning they will generally go up more than the market goes up, and go down more than the market goes down.
β > 1. A beta higher than 1 means the stock is more volatile than the benchmark. Such a stock tends to move by a greater amount compared to the benchmark. For example, let's assume a stock's beta is 2.5. Now, if the benchmark moves up by 1 percent, the stock is likely to move up by 2.5 percent.
The formula to calculate beta is:Beta = Covariance (Stock Returns, Market Returns) / Variance (Market Returns)To use this formula, you need to have historical returns data for the stock and the market. The covariance measures the extent to which the returns of the stock are related to the returns of the market.
A beta value greater than 1.0 signifies that the theoretical volatility of the security's price exceeds that of the market. For example, if a stock's beta is 1.5, it is expected to be 50% more volatile than the market. Small-cap and technology stocks typically have higher betas than the market benchmark.
Can you have a beta of 3?
If an asset has a beta above (below) 1, it indicates that its return moves more (less) than 1-to-1 with the return of the market-portfolio, on average. In practice, few stocks have negative betas (tending to go up when the market goes down). Most stocks have betas between 0 and 3.
A negative beta describes an investment that tends to increase in price when the general market price falls and vice versa. Securities Lending is an example of an investment strategy which has a negative beta. This is because, as the returns available from the market fall, lending rates will generally rise.
| Company | Current Price | Beta |
|---|---|---|
| SIEB Siebert Financial | $1.95 +2.4% | 0.03 |
| RGCO RGC Resources | $18.13 +2.1% | 0.04 |
| SSBK Southern States Bancshares | $25.19 -1.1% | 0.04 |
| ENCP Energem | $11.26 +1.8% | 0.05 |
| Length of pregnancy | Average hCG levels in blood during pregnancy |
|---|---|
| 4 weeks | 0 - 750 µ/L |
| 5 weeks | 200 - 7,000 µ/L |
| 6 weeks | 200 - 32,000 µ/L |
| 7 weeks | 3,000 - 160,000 µ/L |
If the Beta HCG value are inbetween 0-5, that means pregnancy did not occur. Values such as 0.1 and 1.20 can be seen.
