What Are the Beta Values for Stocks?

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Beta values for stocks look at how volatile a stock is in correlation to the stock market. Use beta value for stocks to find stocks that are safe or risky with advice from an investment manager in this free video on investing.

Part of the Video Series: Stocks & Mutual Fund Investments
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Video Transcript

Okay, what is the beta value for a stock? Beta is a measurement of volatility. And, what does volatility mean? Well volatility really is your opportunity to make money in a stock, and we'll get back into that. But really, beta looks at how much the stock moves in correlation to the market. The market is considered to have a beta of one. And, if a stock has a beta of one, or, it's moving in the same correlation of the market. So if the market goes up three percent, the stock will go up three percent. Conversely, if it goes down three percent, the stock will go down three percent. There are stocks that have a beta that is higher than one, say, two. So if the stock market goes up ten percent, and, your stock should go up twenty percent. So it's a way to beat the market. There's also risk involved with a high volatility or a high beta stock, as well, because if the market goes down ten percent, you're going to go down twenty percent if your beta is at two. There's also negative beta. A negative beta just means that whatever the market does, your stock will do the opposite. So if the market goes up three percent, you'll go down. And, beta for a very safe stock should be close to one, or one exactly. And what that will do is just give you something that's very stable. It's not going to outperform the market, more than likely do exactly what the market does. But, that is the safest way. If you wanted to make more money, and look at the opportunity, possibly, you can look at a beta that is higher than one, and that will give you a larger gain, and potentially a larger loss. But, larger gain, potentially, and increase your return.


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