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How to Calculate Beta.
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How to Calculate Beta.

Rosemary Njeri

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.

How 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.

How to Calculate Beta.

Thus, the beta coefficient is 0.71.

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