| The Beta (β) is a financial metric and technical indicator used in trading to measure a stock's price volatility in relation to a benchmark index, typically the overall market represented by a primary index like the S&P 500. Beta helps investors assess the degree to which a particular stock tends to move in sync with broader market movements. A Beta greater than 1 indicates higher volatility than the market, suggesting the stock is more responsive to market fluctuations. A Beta less than 1 suggests lower volatility, indicating the stock tends to move less than the market. Traders use Beta to make informed decisions about portfolio diversification and risk management, opting for stocks with Beta values that align with their risk tolerance and investment strategy. For instance, conservative investors may prefer low-beta stocks for more stable returns, while those seeking higher returns may favor higher-beta stocks with more significant potential for price movements. The parameter for Beta is the number of days to calculate it. It has a value of 5 days by default. |
