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The most common statistical measure of a stock's volatility relative to the market — what a Beta of 1.5 actually means, and why it doesn't capture every kind of risk.
Beta measures how much a stock moves relative to the overall market (typically the S&P 500). A Beta of 1.0 means the stock moves, on average, with the same magnitude as the market. A Beta of 1.5 means that when the market moves 1%, the stock tends to move about 1.5% in the same direction — higher volatility, in both directions. A Beta of 0.5 means the opposite: lower volatility than the market.
A stock with negative Beta tends to move in the opposite direction from the market — very rare, but it exists in certain assets (gold, at certain times). That's why such assets are sometimes considered a natural hedge in a diversified portfolio.
Beta is calculated purely from historical price movement — it doesn't measure regulatory risk, specific geopolitical risk, management quality, or structural business risk (dependency on a single supplier, for example). A stock with low Beta can still be risky for reasons this metric simply doesn't capture.
Beta is one of the metrics in the Risk category (5% of the score), together with actual daily volatility — high Beta/volatility lowers the score even when everything else (technical, fundamental) is positive, because high risk is a real part of the overall picture, not a minor detail.
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The information in this guide is intended for general educational purposes only and does not constitute investment advice. Full details on the disclaimer page.