Is High beta good or bad?

High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.

What is considered a high beta?

A beta of 1.5 is considered to be a high beta stock. This is because a beta greater than 1 indicates that the stock is more volatile than the market, and therefore carries a greater level of risk.

Is a beta of 1.2 high?

A beta that is greater than 1.0 indicates that the security's price is theoretically more volatile than the market. For example, if a stock's beta is 1.2, it is assumed to be 20% more volatile than the market. Technology stocks and small cap stocks tend to have higher betas than the market benchmark.

Is a higher beta good?

A beta above 1.0 means the stock will have greater volatility than the market, and a beta less than 1.0 indicates lower volatility. Volatility is usually an indicator of risk, and higher betas mean higher risk, while lower betas mean lower risk.

What does a beta of 0.8 mean?

For example, a stock with a beta of 0.8 would be expected to return 80% as much as the overall market. A stock with a beta of 1.2 would move 20% more than the overall market. There is more than one way to calculate betas. One of the variables in the beta calculation is how far back you go with the calculation.

What Does A High Beta Stock Mean?

What does a beta of 1.5 mean?

Equity beta allows investors to assess how sensitive a security might be to macro-market risks. For example, a company with a β of 1.5 denotes returns that are 150% as volatile as the market it is being compared to.

What does a beta of 0.9 mean?

A fund can also have a beta that is lower than the benchmark index. In that case, if the fund's beta is 0.9, an investor can expect the fund to perform 10% worse than the index in up markets, and 10% better in down markets. For example, if the index gains 10%, the fund would be expected to gain 9%.

What does a beta of .80 mean?

For example, a stock with a beta value of 0.8 means that stock is only 80% as volatile with its price swings compared with the overall market index. Another way to look at this is that the stock is 20% less volatile than the overall stock market.

Is 1.3 beta high?

If a stock has a beta above 1, it's more volatile than the overall market. For example, if an asset has a beta of 1.3, it's theoretically 30% more volatile than the market. Stocks generally have a positive beta since they are correlated to the market.

What is the ideal beta for a stock?

Key Takeaways. Beta is a concept that measures the expected move in a stock relative to movements in the overall market. A beta greater than 1.0 suggests that the stock is more volatile than the broader market, and a beta less than 1.0 indicates a stock with lower volatility.

Do you want a high or low beta?

Stocks with a beta above 1 tend to be more volatile than their index, while stocks with lower betas tend to be less volatile. High-beta stocks tend to increase a portfolio's overall volatility and low-beta stocks tend to decrease it. However, beta is a backward-looking metric which only measures one kind of risk.

Is a beta of .5 good?

A beta lower than one suggests that a stock is less risky than the market. A beta of . 5 suggests that the stock is 50% less volatile than the market. Adding this type of stock to a portfolio lowers the overall risk but has a similar effect on potential return.

What happens if beta is greater than 1?

If beta is greater than one, the returns on the company stock are more volatile than the market return. A company stock with beta greater than one is called an aggressive stock. If beta is less than one, the returns on the company stock are less volatile than the market return.

What if beta is greater than 1?

A beta greater than 1 indicates that the security's price tends to be more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market. Many young technology companies that trade on the Nasdaq stocks have a beta greater than 1.

Is Tesla high beta?

Beta, on the other hand, measures the volatility (or risk) of an investment. It is an indication of Tesla Inc stock's relative risk over its benchmark. Tesla Inc has a beta of 1.91 .

What makes a stock high beta?

A high beta index refers to a market index that is made up of stocks with higher-than-average volatility as compared to the overall stock market. Some investors aim to maximize returns on investment by investing in high beta stocks, especially during periods when the overall stock market is extremely bullish.

What is the beta of Apple stock?

As of today (2023-03-24), Apple's Beta is 1.25.

Is 1.5 beta risky?

A beta value of 1.5 indicates that the price of the stock is more volatile than the market. In fact, it is assumed to be 50% more volatile than the market. Tech stocks and small caps tend to have high betas.

Does a high beta mean a low alpha?

Many investors prefer a high alpha (or returns in excess of the benchmark's returns) alongside a low beta (implying that their investment is less volatile than the benchmark). This infers returns above market returns without the high volatility risk of large upward or downward swings in performance.

What is considered a low beta?

A stock that has a market value above 1.0 is considered high-beta, whereas a stock with a market value lower than 1.0 is considered as low-beta. The beta, in any market across the world, is 1.0. Investors have to figure out a way to maintain exposure to equities, with the recent volatility in the stock market.

What is Amazon's beta?

Amazon Beta Analysis

Amazon's Beta is one of the most important measures of equity market volatility. Beta can be thought of as asset elasticity or sensitivity to market. In other words, it is a number that shows the relationship of an equity instrument to the financial market in which this instrument is traded.

What industry has high beta?

Typical high beta stocks

A quick filter of the top 50 companies by beta in the Nifty 500 shows a few sectors come up repeatedly like financial services, real estate, automobile, or cyclical sectors such as capital goods, metals, power and construction.

Is a beta of 1.1 risky?

For example, a security with a beta of 1.1 is 10% more volatile than the general market. Securities with high beta values are considered to have a strong potential return, but also a higher risk of loss. Securities with a low beta are considered to be safer, but also have a low probability of experiencing high returns.