Risk Metrics

Beta

A measure of an asset's sensitivity to broad market movements relative to a benchmark (e.g. S&P 500).

Formula

Beta = Cov(Asset, Market) / Var(Market)

Beta quantifies how much an asset moves relative to a market benchmark (typically the S&P 500). A Beta of 1.0 means the asset moves in lockstep with the market. A Beta of 1.5 means it amplifies market moves by 50% — going up 15% when the market rises 10%, and falling 15% when it drops 10%.

Beta below 1 indicates lower sensitivity to market swings — defensive stocks and bonds often have negative or near-zero betas. Some assets like gold can have near-zero or even negative beta, providing portfolio diversification during market downturns.

Important nuance: Beta is backward-looking and computed relative to a specific benchmark. An asset can have a low beta relative to the S&P 500 but high beta relative to emerging markets. Always check what benchmark is being used.

On StressTest.pro, Beta is derived using a rolling regression of daily returns against VTI.US (Vanguard Total Stock Market ETF) as the broad market proxy over the full measurement window.

Frequently Asked Questions

Is a high beta good or bad?

Neither inherently — it depends on your objective. High-beta stocks amplify both gains and losses. In a bull market, a beta of 1.5+ is attractive. In a bear market, high-beta positions destroy value faster than the index. Conservative investors typically prefer beta below 1.0.

See Beta in Action

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