Concept
Beta
Beta is a Statistics concept. The Library holds 2 implementations, each one a working definition you can pull into Quant.
Top Beta indicators
2 total
What is Beta?
Beta measures how strongly an asset's returns move with a benchmark's. Formally it is the covariance of the asset's returns with the benchmark's returns divided by the variance of the benchmark's returns, which is the same thing as the slope of a linear regression of asset returns on benchmark returns. A beta of 1 means the asset has historically moved in line with the index; above 1, amplified; between 0 and 1, damped; negative, tending to move opposite.
Beta and correlation answer different questions. Correlation says how reliably two series move together; beta says how much, because beta equals correlation multiplied by the ratio of the asset's volatility to the benchmark's. A volatile, loosely correlated asset can still print a large beta. And beta is a windowed estimate, not a fixed attribute: it drifts with regime, lookback, and return frequency.
How traders use it
- Hedging and sizing: index hedges are scaled by beta so the hedge notional actually offsets the position's measured market sensitivity rather than its raw dollar size.
- Regime-fit screening: leaning into high-beta names when the index trend is the engine of the trade, rotating toward low-beta names when the goal is to mute index chop.
- Beta-adjusted performance reads: a stock up 1% while its index is up 2% is lagging once beta is accounted for; alpha is the formal name for what remains after that adjustment.
Beta vs. neighboring measures
Correlation: Correlation measures how reliably two return series move together, bounded between -1 and 1. Beta measures how much the asset moves per unit of benchmark move, scaling correlation by relative volatility. Tight correlation with small moves gives a low beta; loose correlation with violent moves can still produce a high one.
Alpha: Both come from the same return regression. Beta is the slope, the market-linked component of returns; alpha is the intercept, the residual return left after the beta-scaled market contribution is removed. Exposure versus excess.
Related concepts · Relationships
Concept family
Statistics
45 concepts mapped · 37 in the Library
Beta FAQ
What does a beta of 1.5 mean?
Over the measurement window, the asset moved on average about 1.5% for every 1% move in the benchmark. It is a regression slope, not a promise: on any single day the relationship can fail completely, and betas drift as regimes change, so a beta estimated on the past quarter may describe the next one poorly.
Is high beta the same as high volatility?
No. Volatility describes an asset on its own; beta describes only the index-linked component of its movement. Because beta combines correlation with relative volatility, an extremely volatile asset that barely tracks the index can carry a low beta, while a moderately volatile asset that tracks it tightly can carry a high one.
Build Beta your way.
Quant writes, tests, and refines it with you — then it runs on LuxAlgo charting or ports to TradingView.