Beta Calculator
Beta measures how much a stock moves relative to the overall market. A beta of 1 means it tends to move with the market, above 1 means it is more volatile, below 1 less volatile, and a negative beta means it tends to move opposite the market. Beta is backward-looking and depends on the period and market index you use. A stock's beta can change over time, so treat it as an estimate of past sensitivity, not a guarantee of future moves.
Estimate beta
Adjust the assumptions. Results update in your browser only.
Comma-separated periodic returns, such as monthly returns.
Use the same dates and order as the stock return series.
Beta
2.0
Across 3 paired observations, the stock moved 2.0 times the market in this historical sample.
Breakdown
- Observations
- 3
- Covariance
- 144.4444
- Market variance
- 72.2222
How the Beta calculator works
Beta is a historical sensitivity estimate from paired stock and market returns. It is useful for risk comparison and cost of equity inputs, but it is not a forecast.
The calculator parses the paired return series you enter, calculates average stock and market returns, then divides population covariance by population market variance.
stockMean = mean(stockReturns)
marketMean = mean(marketReturns)
cov = mean((stock_i - stockMean) * (market_i - marketMean))
varMarket = mean((market_i - marketMean)^2)
beta = varMarket > 0 ? cov / varMarket : 0- Stock and market returns must cover the same dates and appear in the same order.
- Returns can be entered as percentages because beta is a ratio, so the unit cancels out.
- This calculator uses population covariance and population variance across the observations you provide.
When to use it
Helpful for
- Estimating how sensitive a stock has been to a chosen market index.
- Supplying a beta input for CAPM cost of equity and WACC work.
- Comparing defensive and aggressive stocks using the same return frequency and index.
Can mislead when
- The chosen market index does not match the stock or portfolio you are analyzing.
- The lookback period includes a one-off shock that no longer reflects the business.
- Company-specific risk dominates returns, so market sensitivity explains little of the movement.
Common mistakes
- Mixing daily stock returns with monthly market returns.
- Using return series with different dates or missing observations.
- Treating beta as a complete risk measure when it captures only market-related risk.
- Assuming one historical beta will hold after a major business, leverage, or sector change.
Worked example
The default inputs use stock returns of 20, -20, and 10 against market returns of 10, -10, and 5. The stock series is exactly 2 times the market series each period, so beta is 2.0.
| Input | Value |
|---|---|
| Stock returns | 20, -20, 10 |
| Market returns | 10, -10, 5 |
| Observations | 3 |
| Beta | 2.0 |
Frequently asked questions
There is no universally good beta; it depends on your risk tolerance. A beta below 1 is more defensive and tends to move less than the market, while a beta above 1 is more aggressive with bigger swings in both directions. Choose based on how much volatility you are willing to hold.
It means the stock has historically moved about 1.5 times as much as the market. If the market rose 10 percent, a beta-1.5 stock tended to rise about 15 percent, and it would tend to fall more in a decline too.
Use periodic returns (for example monthly) for the stock and a market index such as the S&P 500 over the same dates. Paste the two series here in the same order; this calculator computes beta from the pairs you provide.
Beta is backward-looking, sensitive to the time period and index chosen, and only captures market-related (systematic) risk. It says nothing about company-specific risk, and a low R-squared means the market explains little of the stock's movement.
Screen stocks by risk and valuation
Use the screener to compare valuation metrics before relying on a single beta estimate.