Beta is a measure of a stock’s volatility in relation to the overall market.
The beta for a stock describes how much the stock’s price moves in relation to the market.
It’s generally used as both a measure of systematic risk and a performance measure.
Formula to calculate beta.
Covariance is a measure of how much two random variables vary together. It’s similar to variance, but where variance tells you how a single variable varies, covariance tells you how two variables vary together.
Example:
Suppose you worked the covariance and the variance of a certain data set and got the covariance as 5%, while the variance was 7%. Calculate the beta.
Thus, the beta coefficient is 0.71.
