What does Beta mean?

Beta measures how much a stock tends to move compared to the overall market — a beta of 1.5 means it typically moves 50% more than the market, up or down.

Beta measures a stock's volatility relative to the market (usually the S&P 500, set at 1.0). A beta of 1.5 means the stock typically swings 50% more than the market in both directions; a beta of 0.5 means it's calmer. High-beta stocks amplify both gains and losses.

Beta example

A stock with a beta of 1.5 has historically moved about 1.5 times as much as the market: if the S&P 500 drops 10%, it might drop around 15%. A beta of 0.6 suggests about a 6% fall.

Common beginner mistake

Treating beta as a measure of total risk. It only captures how a stock moves with the market, not company-specific shocks like a failed product.