S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain

High Beta Stocks

Beta is the calculation that measures the relative volatility of a stock in correlation to a particular standard. For U.S. stocks that standard is usually, but not always, the S&P 500. Beta is a form of regression analysis and it can be useful for investors regardless of their risk tolerance. Beta is considered one of the few data points that can be beneficial for practitioners of both fundamental analysis and technical analysis. This page lists stocks that have unusually high beta calculations. For example, a beta of 2.0 means a stock moves twice as much as the S&P 500. Learn more about high beta stocks.

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CompanyCurrent PriceBetaPE RatioMarket CapVolumeAverage VolumeIndicator(s)
Direct Digital Holdings, Inc. stock logo
DRCT
Direct Digital
$3.99
+6.4%
4.8824.94$56.58 million40,60096,305
Permian Resources Co. stock logo
PR
Permian Resources
$9.61
+3.4%
4.515.14$5.38 billion8.24 million7.18 million
SM Energy stock logo
SM
SM Energy
$26.69
-0.7%
4.402.62$3.22 billion1.33 million1.87 millionAnalyst Report
CleanSpark, Inc. stock logo
CLSK
CleanSpark
$4.22
+0.2%
3.907.26$475.55 million5.46 million5.83 millionGap Up
Eastman Kodak stock logo
KODK
Eastman Kodak
$4.42
+1.4%
3.728.34$350.68 million659,200566,918
Matador Resources stock logo
MTDR
Matador Resources
$45.34
+1.5%
3.544.65$5.40 billion1.04 million1.30 million
APA Co. stock logo
APA
APA
$33.41
+2.1%
3.535.43$10.31 billion6.77 million5.99 millionAnalyst Report
Analyst Revision
Antero Resources Co. stock logo
AR
Antero Resources
$23.70
0.0%
3.463.38$7.11 billion8.65 million5.87 millionAnalyst Report
Vital Energy, Inc. stock logo
VTLE
Vital Energy
$43.52
-0.7%
3.350.88$809.47 million470,500675,195Analyst Report
Analyst Revision
Nine Energy Service, Inc. stock logo
NINE
Nine Energy Service
$3.42
+4.3%
3.337.28$118.74 million976,1001.22 millionGap Up
Canaan Inc. stock logo
CAN
Canaan
$2.48
-0.4%
3.234.07$425.32 million997,9002.16 millionUpcoming Earnings
Rayonier Advanced Materials Inc. stock logo
RYAM
Rayonier Advanced Materials
$4.34
+3.1%
3.1227.13$282.62 million715,200742,448Positive News
Oil States International, Inc. stock logo
OIS
Oil States International
$6.98
+1.6%
2.93232.67$448.47 million572,500741,168Positive News
Gap Up
Velo3D, Inc. stock logo
VLD
Velo3D
$1.72
-1.7%
2.8212.29$330.91 million1.39 million1.63 millionGap Up
Forum Energy Technologies, Inc. stock logo
FET
Forum Energy Technologies
$23.71
-1.2%
2.8257.83$240.66 million38,70084,412
Oceaneering International, Inc. stock logo
OII
Oceaneering International
$16.28
+0.2%
2.8233.22$1.64 billion410,700968,370
Kosmos Energy Ltd. stock logo
KOS
Kosmos Energy
$6.34
+1.0%
2.799.75$2.92 billion3.41 million5.99 millionPositive News
Ovintiv Inc. stock logo
OVV
Ovintiv
$34.52
+2.0%
2.782.02$8.44 billion3.84 million3.38 millionAnalyst Report
Analyst Revision
Western Midstream Partners, LP stock logo
WES
Western Midstream Partners
$26.81
+0.8%
2.779.68$10.31 billion780,800925,305Analyst Revision
Adient plc stock logo
ADNT
Adient
$35.44
-1.6%
2.75295.33$3.36 billion487,700878,684
Big 5 Sporting Goods Co. stock logo
BGFV
Big 5 Sporting Goods
$7.66
-3.3%
2.739.70$171.51 million249,200295,878
Callon Petroleum stock logo
CPE
Callon Petroleum
$32.17
-1.0%
2.731.43$1.99 billion874,5001.48 millionAnalyst Report
Analyst Revision
eXp World Holdings, Inc. stock logo
EXPI
eXp World
$14.46
-0.9%
2.73289.26$2.22 billion633,200815,552
Denbury Inc. stock logo
DEN
Denbury
$91.07
-0.9%
2.708.64$4.58 billion582,000604,280Analyst Revision
MP Materials Corp. stock logo
MP
MP Materials
$21.27
-3.8%
2.6916.75$3.78 billion2.42 million2.20 millionPositive News
Core Laboratories stock logo
CLB
Core Laboratories
$21.79
+2.5%
2.6743.58$1.02 billion1.56 million366,624High Trading Volume
Kinetik Holdings Inc. stock logo
KNTK
Kinetik
$31.80
+0.8%
2.6524.65$4.55 billion129,500247,084Analyst Revision
Positive News
Triumph Group, Inc. stock logo
TGI
Triumph Group
$12.03
-0.9%
2.619.40$782.07 million1.30 million1.00 millionEarnings Report
Arcturus Therapeutics Holdings Inc. stock logo
ARCT
Arcturus Therapeutics
$26.73
-3.2%
2.616.60$709.95 million415,600461,986
U.S. Silica Holdings, Inc. stock logo
SLCA
U.S. Silica
$12.65
+1.3%
2.607.57$974.81 million613,700750,228
Camping World Holdings, Inc. stock logo
CWH
Camping World
$26.46
-1.6%
2.5511.81$2.22 billion1.09 million1.13 million
EnLink Midstream, LLC stock logo
ENLC
EnLink Midstream
$9.88
-0.1%
2.5512.51$4.60 billion2.02 million2.34 millionAnalyst Revision
ChampionX Co. stock logo
CHX
ChampionX
$27.16
-1.9%
2.5530.86$5.38 billion1.34 million1.56 million
TETRA Technologies, Inc. stock logo
TTI
TETRA Technologies
$2.75
-1.1%
2.5455.01$355.85 million529,9001.22 million
Century Casinos, Inc. stock logo
CNTY
Century Casinos
$7.01
-1.1%
2.5236.90$212.61 million23,90068,507
PDC Energy, Inc. stock logo
PDCE
PDC Energy
$65.12
+0.2%
2.512.77$5.70 billion566,600815,371
TaskUs, Inc. stock logo
TASK
TaskUs
$11.31
-1.6%
2.5030.57$1.10 billion318,900438,854
YETI Holdings, Inc. stock logo
YETI
YETI
$39.33
-3.0%
2.4846.27$3.41 billion1.24 million1.18 million
Alpha and Omega Semiconductor Limited stock logo
AOSL
Alpha and Omega Semiconductor
$27.15
+1.2%
2.4828.88$746.35 million175,800233,235
Digital Turbine, Inc. stock logo
APPS
Digital Turbine
$13.78
-1.7%
2.4728.12$1.37 billion1.52 million2.02 million
Hovnanian Enterprises, Inc. stock logo
HOV
Hovnanian Enterprises
$90.99
-1.2%
2.473.17$545.94 million53,70072,750
Herc Holdings Inc. stock logo
HRI
Herc
$105.41
-1.8%
2.469.34$3.00 billion340,000376,325Positive News
Crescent Energy stock logo
CRGY
Crescent Energy
$10.21
-1.5%
2.451.87$1.71 billion252,800381,132Positive News
OneWater Marine Inc. stock logo
ONEW
OneWater Marine
$27.82
-1.9%
2.443.81$438.17 million64,200110,009
China Automotive Systems, Inc. stock logo
CAAS
China Automotive Systems
$5.31
-3.6%
2.415.77$160.31 million110,600163,009
DCP Midstream, LP stock logo
DCP
DCP Midstream
$41.48
0.0%
2.407.70$8.66 billion601,6001.41 millionAnalyst Revision
News Coverage
Positive News
GasLog Partners LP stock logo
GLOP
GasLog Partners
$8.52
-0.1%
2.404.81$449.86 million161,600481,268Analyst Report
The Lovesac Company stock logo
LOVE
Lovesac
$22.51
-4.8%
2.3912.79$342.15 million437,500479,688
Amplify Energy Corp. stock logo
AMPY
Amplify Energy
$7.07
-1.0%
2.390.62$275.52 million417,400564,451
Precision Drilling Co. stock logo
PDS
Precision Drilling
$46.41
-1.5%
2.3910.41$636.75 million37,20072,354Positive News
Marathon Oil Co. stock logo
MRO
Marathon Oil
$23.07
+0.1%
2.395.67$14.25 billion10.58 million10.57 millionAnalyst Report
Ebix, Inc. stock logo
EBIX
Ebix
$17.45
2.3710.20$539.21 million301,300461,142
PlayAGS Inc stock logo
AGS
PlayAGS
$6.08
+5.0%
2.3760.81$230.55 million382,800623,557Gap Up
Murphy Oil Co. stock logo
MUR
Murphy Oil
$35.08
-1.0%
2.374.35$5.48 billion1.73 million1.73 millionAnalyst Report
Antero Midstream Co. stock logo
AM
Antero Midstream
$10.69
+0.9%
2.3615.49$5.13 billion1.85 million2.85 million
Brinker International, Inc. stock logo
EAT
Brinker International
$39.54
-2.6%
2.3620.28$1.75 billion697,1001.02 million
Golden Entertainment, Inc. stock logo
GDEN
Golden Entertainment
$41.15
+4.3%
2.3522.24$1.19 billion221,100175,488Analyst Upgrade
Boot Barn Holdings, Inc. stock logo
BOOT
Boot Barn
$64.77
-3.0%
2.3511.52$1.93 billion2.10 million769,328Earnings Report
Analyst Revision
High Trading Volume
Sunrun Inc. stock logo
RUN
Sunrun
$14.63
-6.6%
2.34209.03$3.15 billion12.56 million9.26 million
Devon Energy Co. stock logo
DVN
Devon Energy
$49.20
+1.9%
2.345.37$32.18 billion8.29 million9.47 millionAnalyst Report
ProPetro Holding Corp. stock logo
PUMP
ProPetro
$7.39
+0.7%
2.3449.27$851.55 million1.35 million1.49 million
SilverBow Resources, Inc. stock logo
SBOW
SilverBow Resources
$24.38
-1.7%
2.341.06$551.48 million183,000290,142
SandRidge Energy, Inc. stock logo
SD
SandRidge Energy
$17.20
-0.6%
2.342.77$634.68 million829,800553,315
Everi Holdings Inc. stock logo
EVRI
Everi
$15.06
+2.3%
2.3312.45$1.34 billion1.31 million753,770Positive News
Citi Trends, Inc. stock logo
CTRN
Citi Trends
$17.43
-3.3%
2.312.45$144.84 million283,500136,278Upcoming Earnings
High Trading Volume
Avis Budget Group, Inc. stock logo
CAR
Avis Budget Group
$160.32
-1.5%
2.312.90$6.37 billion266,500516,736
Liberty TripAdvisor Holdings, Inc. stock logo
LTRPA
Liberty TripAdvisor
$0.68
-1.3%
2.292.06$51.75 million145,100324,317Gap Up
Targa Resources Corp. stock logo
TRGP
Targa Resources
$70.22
+0.8%
2.2818.19$15.87 billion1.44 million1.61 millionAnalyst Report
Analyst Revision
Patterson-UTI Energy, Inc. stock logo
PTEN
Patterson-UTI Energy
$10.66
-2.8%
2.288.20$2.22 billion2.60 million3.45 millionAnalyst Report
Capri Holdings Limited stock logo
CPRI
Capri
$39.54
-3.7%
2.277.47$4.97 billion2.11 million2.50 million
JELD-WEN Holding, Inc. stock logo
JELD
JELD-WEN
$14.70
-1.9%
2.2620.70$1.25 billion426,300525,235Gap Up
BRP Inc. stock logo
DOOO
BRP
$74.48
-3.1%
2.269.16$5.88 billion52,40052,198
Modine Manufacturing stock logo
MOD
Modine Manufacturing
$21.24
-1.4%
2.2515.73$1.11 billion371,500418,128Upcoming Earnings
American Axle & Manufacturing Holdings, Inc. stock logo
AXL
American Axle & Manufacturing
$6.99
-0.7%
2.2514.56$817.97 million1.23 million977,384Analyst Downgrade
Gap Down
Service Properties Trust stock logo
SVC
Service Properties Trust
$8.05
-0.7%
2.2489.44$1.33 billion1.02 million1.10 million
Cenovus Energy Inc. stock logo
CVE
Cenovus Energy
$16.51
+0.5%
2.247.94$31.46 billion6.20 million7.61 million
Arhaus, Inc. stock logo
ARHS
Arhaus
$7.37
-2.4%
2.246.70$1.03 billion657,7001.09 million
PENN Entertainment, Inc. stock logo
PENN
PENN Entertainment
$24.53
-2.0%
2.226.06$3.78 billion4.28 million2.40 million
Cleveland-Cliffs Inc. stock logo
CLF
Cleveland-Cliffs
$14.93
-2.9%
2.2216.59$7.69 billion8.29 million10.24 million
The ONE Group Hospitality, Inc. stock logo
STKS
ONE Group Hospitality
$7.60
+2.0%
2.2220.54$242.29 million153,30092,633
Crescent Point Energy Corp. stock logo
CPG
Crescent Point Energy
$6.75
+0.4%
2.229.51$3.66 billion1.81 million5.46 million
Ferroglobe PLC stock logo
GSM
Ferroglobe
$4.65
+2.2%
2.222.67$871.55 million930,4001.27 million
Vermilion Energy Inc. stock logo
VET
Vermilion Energy
$12.05
+1.7%
2.221.89$1.96 billion786,6001.59 million
Talos Energy Inc. stock logo
TALO
Talos Energy
$12.07
+0.3%
2.211.95$1.52 billion1.20 million1.68 millionAnalyst Report
Nordstrom, Inc. stock logo
JWN
Nordstrom
$15.44
-3.9%
2.2110.23$2.49 billion3.37 million5.60 millionDividend Announcement
Target Hospitality Corp. stock logo
TH
Target Hospitality
$15.60
-2.4%
2.2013.81$1.58 billion257,900616,265
Six Flags Entertainment Co. stock logo
SIX
Six Flags Entertainment
$25.77
-4.7%
2.1920.78$2.15 billion1.35 million1.80 million
Consumer Portfolio Services, Inc. stock logo
CPSS
Consumer Portfolio Services
$10.73
+1.2%
2.193.59$222.97 million32,30039,602
On Holding AG stock logo
ONON
ON
$26.69
-3.0%
2.1892.03$16.75 billion8.28 million4.10 millionEarnings Report
High Trading Volume
Enerplus Co. stock logo
ERF
Enerplus
$14.75
+1.7%
2.183.41$3.16 billion1.39 million1.14 million
Tenet Healthcare Co. stock logo
THC
Tenet Healthcare
$72.88
-0.4%
2.1819.43$7.43 billion768,6001.58 million
Berry Co. stock logo
BRY
Berry
$6.82
+0.4%
2.181.85$525.69 million483,600717,275Analyst Revision
Titan International, Inc. stock logo
TWI
Titan International
$10.91
2.183.76$688.75 million401,700494,498
MRC Global Inc. stock logo
MRC
MRC Global
$9.06
-2.2%
2.1811.19$762.94 million400,500648,997
JAKKS Pacific, Inc. stock logo
JAKK
JAKKS Pacific
$23.14
+1.6%
2.172.64$228.39 million100,100118,455
Pitney Bowes Inc. stock logo
PBI
Pitney Bowes
$3.25
-0.3%
2.1765.01$570.80 million1.12 million1.45 millionEx-Dividend
Positive News
Atkore Inc. stock logo
ATKR
Atkore
$122.44
-1.5%
2.176.30$4.72 billion391,600470,888
Beazer Homes USA, Inc. stock logo
BZH
Beazer Homes USA
$21.12
-2.9%
2.173.24$662.11 million204,100272,618
Red Rock Resorts, Inc. stock logo
RRR
Red Rock Resorts
$47.10
-0.9%
2.1714.14$4.91 billion342,500450,911
Veritiv Co. stock logo
VRTV
Veritiv
$112.15
+0.3%
2.164.84$1.52 billion103,000131,170

We often hear the word beta in the context of “beta test”. It’s a way of testing something (e.g. a software program) in a real-world situation to iron out any glitches before rolling it out to the public.

In the context of investing, understanding beta also serves a predictive function. Specifically, knowing a stock’s beta can help investors understand why a company may be performing or underperforming. In this way, beta can help investors predict how a stock is likely to perform before they buy the stock.

This article will define beta and key terms to help investors understand beta. We’ll also review the difference between provided beta and personally calculated beta, what beta indicates, and how to use beta to diversify a portfolio. And finally, we’ll look at a couple of limitations to beta.

Beta measures the relative volatility of a stock in correlation to a particular standard. For U.S. stocks that standard is usually, but not always, the S&P 500. Beta can also be used by investors to evaluate a particular stock’s expected rate of return, particularly when using the Capital Asset Pricing Model (CAMP).

Beta is a form of regression analysis and it can be useful for investors regardless of their risk tolerance. Beta is considered one of the few data points that can be beneficial for practitioners of fundamental analysis and technical analysis. Investors who tend to analyze stocks using fundamental analysis will use beta along with price-to-earnings ratio, shareholders equity, debt-to-equity ratio and other factors. Technical analysts will use beta as an indicator of stocks that offer the price movement they are seeking. They will use beta along with other indicators such as average daily trading volume (ADTV) and a stock’s moving average.

Investing websites like MarketBeat give investors access to many company’s financial metrics. This means that investors do not typically need to calculate beta for themselves. But it’s still helpful to understand the meaning of two variables that are used in the formula for beta. These variables are covariance and variance.

  • Covariance is a measurement of how two stocks move together. If the number is positive it means the price movement is generally correlated (i.e. when one stock goes up, so does the other and vice versa). If the number is negative, it means the price movement is generally not correlated (i.e. when one stock goes up, the other goes down and vice versa).
  • Variance is a measurement of how far a stock moves in relation to its mean. In the case of beta, the mean is whatever benchmark is being used.

With that in mind, Beta is found by dividing covariance by variance. A financial advisor—or any investor, really—can leverage the beta calculation to measure individual stocks in terms of risk, relative to the stock market, or even a more specific index or fund, such as the securities in exchange-traded funds or a portfolio of stocks. 

An investment advisor (or formula-savvy retail investor) can then leverage the beta calculation again to build a capital asset pricing model. This more complex formula provides mathematically-backed investment advice about the risk of individual stocks relative to their expected rate of return.

Investors can then build an investment strategy to reduce risk and acquire an asset that will outperform the market—minimizing losses and increasing gains.

Individual investors who are active traders will also want to make sure they do their own beta calculation to assess risk and build a CAPM to assess potential gains. Though it’s not the only stat they need to formulate a strategy, it’s as important as any of the other ones, such as market capitalization and price. 

In many cases, a financial website will give what’s known as the “provided beta” for a particular stock. For active traders, financial software programs will also provide the beta value. When using a provided beta, investors should pay attention to two variables.

First, it’s important to understand what benchmark is being used to determine beta. Since the beta shows a correlation between a particular security and something, an investor needs to know what that something is. As pointed out above, for U.S. stocks it is common for beta to be expressed as a correlation to a stock index, usually the S&P 500, but not always. In some cases, the Dow Jones Industrial Average (DJIA) may be used, or even the NASDAQ.

The second thing an investor will need to know about a stock’s beta is the time frame that is being measured. If you’re a long-term investor, you may want to know the beta over several years. If you’re an active trader, you’ll probably be more interested in the beta over a much more recent timeframe.

A personally calculated beta, on the other hand, is one that investors will calculate for themselves. To calculate beta, investors will have to know the covariance between the return of the stock being analyzed and the return of the benchmark for that stock as well as the variance of the market returns.

As we mentioned above, many financial software programs will do the calculation for you. It is also possible to use an Excel spreadsheet to calculate beta. For many investors, particularly those who are engaging in day trading, a personally calculated beta may be more accurate for their needs.

Beta can get confusing if an investor gets hung up on positive and negative. When an investor sees a negative number, they instinctively think a stock is falling (i.e. generating a negative return). That is not necessarily the case with a negative beta. Here’s why:

As we defined it above, beta is a correlation between the price movement of a security and a benchmark related to that security. Beta is a multiplicative factor. So a beta of 1.3 means that a stock is 30% more volatile than the broader stock market.

For these examples, let’s assume an investor is buying a U.S. stock that is being benchmarked to the S&P 500. The beta of the S&P 500 is 1. The simplest explanation for this is that in establishing a benchmark, you’re dividing one thing by itself and that will always equal 1.

So knowing the beta of the S&P 500 is 1, here’s how investors can interpret the beta of a particular stock:

  • Beta of 1 – this means a stock is highly correlated to the S&P 500. Therefore, if the S&P 500 index is up for the day, the stock is more than likely going to be up for the day and vice versa. A beta of 1 also means that price movement will probably be very similar. In other words, if you were to overlay the stock’s price movement over the S&P 500, the two lines would look very similar.
  • Beta of less than 1 – this means a stock is not very correlated with the market. Sometimes it will follow the trend in the market, but sometimes it won’t. In terms of price movement, a beta of less than 1 is indicating that the stock is less volatile (i.e. less reactive to price movements in the broader market).
  • Beta of more than 1 – this also means a stock is not very correlated to the market. However, unlike a beta of less than 1, this means a stock is highly volatile (i.e. more reactive to price movements in the broader market).
  • Beta of less than 0 (i.e. a negative beta) – this means a stock is inversely correlated to the market. The tendency of the stock is to move in the opposite direction as the market. The higher the negative number, the more volatile the stock.

The key thing to know about beta is its relationship to the number 1. The closer the number is to 1, the more it is correlated to the market; the further it is from 1, the less it is correlated. A beta can also be much higher than 1. There are some stocks that can have a beta of 2 or more.

Let’s go through some examples as of July 21, 2022:

  • Microsoft (NASDAQ: MSFT) has a beta of 0.93. This puts its volatility right in line with the broader market. This is what you might expect from a blue-chip stock.
  • Walt Disney Company (NYSE: DIS) has a beta of 1.24. This means an investor can reasonably expect that this stock is 25% more volatile than the market.
  • Advanced Micro Devices (NASDAQ: AMD) has a beta of 1.96. This means the stock price has almost twice the volatility of the market.
  • In contrast, Duke Energy (NYSE: DUK) has a beta of around 0.35. This means it is not a very volatile stock, which is what investors would expect from a utility stock. However, this doesn’t mean that the stock is underperforming.

This brings to mind a third, and perhaps the most important thing to know about beta. Beta measures potential volatility, not price performance. A positive beta does not mean that a stock is going up in price. In fact, a stock that has a high beta while the market is falling is more than likely falling at a higher percentage rate than the market.

Likewise, a negative beta does not mean that a stock is going down in price. When the market is trending lower, these stocks will tend to rise. A negative beta also does not mean that a company is underperforming. It just the the company operates in a sector that will naturally work in opposition to the broader market. Stocks of gold mining companies and gold ETFs are a good example of this. You would expect these stocks to have a negative beta compared to the market because gold (and many other precious metals) tend to rise when the market falls and vice versa.

How can knowing the beta help investors create a more diversified portfolio? For starters, diversification is not just about investing in different asset classes. It's about investing in different types of assets within those classes. This is where beta can be a very useful measurement.

Many investors think they are diversified when they’re actually not. For example, two blue-chip stocks can have quite a difference in beta. This will affect the expectations of stock performance even though, based on market cap and other factors, the stocks look to be equal.

Using our example above, if an investor is looking for growth, they will want to look at stocks that have a beta above 1. This gives them a greater chance of a higher return for a higher risk of the stock losing value when the market goes down. However, they can hedge this volatility by adding a variety of stocks that are closer to 1, depending on their risk tolerance. Investors who are more active traders may also wish to look at stocks with negative betas if they predict the market will go down.

As we mentioned above, it’s important to understand what beta is using as a benchmark and the timeline that is being measured. If an investor is looking at a mining stock or ETF for example, knowing that it has a negative beta, while helpful, may be somewhat obvious. An investor may need more information to perform greater fundamental or technical analysis to better assess whether a stock belongs in their portfolio. One way to do this may be to calculate its beta as compared to a precious metals index.

Also, beta does not take into account recent news events that may impact a stock. There are some programs that will calculate a time-varying beta estimate which attempts to take into account factors that affect the characteristics of a company that may affect the way its beta is calculated. However, in general, it would take a significant change over a significant period of time to change a beta in a meaningful way. That's why day traders and other short-term investors will look at other technical cues to decide on whether to invest in a stock.

High beta stocks do carry some risks. Stocks with high betas are more volatile in comparison to the overall market or index. Beta actually says nothing about the direction of a stock’s momentum in price, or the relative strength of the company. 

If a stock price is ballooning beyond the pace of the market, the company may be overvalued. Eventually, that bubble will pop, leaving investors with great losses. Smart investors and traders do not ride waves of hype. Conversely, a high beta stock may be from a company whose stock price is plummeting due to some current events that might have a longstanding negative impact, such as downsizing or bankruptcy. 

High beta stocks may indicate a history of frequent movement in opposition to the overall stock market. These types of stocks are generally volatile and can throw off investors who do not have experience riding market waves—that is, knowing when to buy and sell. If an investor is involved with active trading and prefers to minimize their risk, they can also balance out their trading with some low beta stocks. These less-volatile securities can stabilize their portfolio of stocks by compensating for some of the losses incurred by high beta stocks that deviate from an expected return. 

A smart beta strategy can be used to minimize the risk impact of high beta stocks. This type of strategy might combine something passive and more stable, like a dividend investing strategy, with active trading in order to minimize losses from the most volatile stocks in the fund. 

Investors working with high beta stocks are hoping to cash out on the stock price waves, buying low and selling high. They may have scoured lists of cheap stocks to buy or stock market gainers in their search for potential profits, but if they’re playing a short game like day trading, finding stocks with the most momentum can provide an easy entry and exit strategy to cash out on the same day. 

Beta only provides information about the momentum of individual stocks in relation to the stock market. It is not an indicator of future or past performance.

However, high beta stocks will have price swings that can lead to great gains, if bought and sold appropriately. It’s important for active traders using the beta calculation (and other stats) to consider the alpha and beta of a stock—the former being an indicator of how much return a stock historically provides relative to its risk. 

Of course, investors looking for the most stable investments will want to look at a capital asset like rental property, treasury bills, or mutual funds—avoiding high beta stocks, or even the whole process of analyzing beta and calculating risk as they buy and sell securities. But while these investment strategies can minimize losses, they don’t fund great gains, either. Investors who want steady gains but minimal risk should consider looking into securities that generate dividends

Beta is one of the fundamental regression analysis metrics that an investor can use to assess the volatility of a stock compared to a benchmark index such as the S&P 500. Although beta is not used to predict specific price movement, it provides a general sense of how a stock will trend compared to the overall market.

In general:

  • Investors with a low risk tolerance will probably want to have stocks with lower betas (i.e. 1 or lower).
  • Investors with a higher risk tolerance will want to look at stocks with high beta values because of the potential for high returns.
  • Investors who are not interested in cashing out on a risk-reward relationship might explore other options, such as the best growth stocks. But even then, the best high beta stocks can provide a forecast of how volatile it will be in the future—and in turn, build a capital asset pricing model to determine potential reward. 

Because of its utility as an assessment of volatility, beta is a metric used in both fundamental analysis and technical analysis. Beta can help investors take an objective look at their portfolio and give them direction on how to maintain proper diversification. However, like any metric, beta has its limitations. Investors who are looking for specific indicators of future results will need to look beyond beta to assess if a stock is right for their portfolio.


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