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. Itâ€™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.