Financial Terms / beta

# Discover the Dynamic Beta

Beta is a measure of a security's volatility compared to the market as a whole, making it a dynamic and important factor to consider when assessing performance.

## Formula

``β = Cov(Ri,Rm) / Var(Rm)``

## How do I calculate the beta?

`Beta is a measure used in financial analysis to measure the risk-reward ratio of a stock. The formula for calculating beta is `β = Cov(Ri,Rm) / Var(Rm)` where Ri is the return of the stock you are analyzing and Rm is the return of the market. Beta can be calculated manually or using programs like Sourcetable.`

## What is Beta?

`Beta is a measure of systematic risk associated with a security, portfolio, or investment opportunity. It is used in the capital asset pricing model (CAPM) to price risky securities and to estimate expected returns of assets.`

## What is the Capital Asset Pricing Model?

`The Capital Asset Pricing Model (CAPM) is a model used to determine the expected return of an asset given its level of risk. The formula for CAPM is: `E(Ri) = Rf + ÃŸi(E(Rm) - Rf)`, where E(Ri) is the expected return of the asset, Rf is the risk-free rate, ÃŸi is the beta coefficient of the asset, and E(Rm) is the expected return of the market portfolio.`

## Key Points

How do I calculate beta?
`β = Cov(Ri,Rm) / Var(Rm)`
Beta Measures Volatility
Beta is a measure of the volatility of a security or portfolio compared to the market as a whole. This allows investors to assess how their investments may move in relation to the market.
Dynamic Measurement
Beta is a dynamic measure, meaning that it is constantly changing as the market fluctuates. As such, investors must pay close attention to their beta and make adjustments accordingly.