Quick answer
Beta measures how a stock has moved relative to the overall market, usually a benchmark index. A beta of 1 moves in line with the benchmark; above 1 has swung more; below 1 has swung less [1].
#How do you read a beta number?
FINRA uses two examples. A stock with a beta of 1.2 has historically moved 120 percent for every 100 percent move in a benchmark index, and a stock with a beta of 0.85 has historically moved less than the index [1]. A common benchmark for U.S. stocks is the S&P 500, which its provider describes as a gauge of large-cap U.S. equities [2].
| Beta | Past behavior compared with the benchmark |
|---|---|
| Above 1 (e.g. 1.2) | Larger moves than the market, both up and down |
| About 1 | Moves roughly in line with the market |
| Between 0 and 1 (e.g. 0.85) | Smaller moves than the market |
| Below 0 | Has tended to move opposite to the market (uncommon) |
Worked example
Beta as a rough scaling factor
Two stocks have betas of 1.2 and 0.85. We apply each beta to a 10% market move, then estimate a beta from six months of made-up data.
- Beta 1.2, market −10%
- about −12%
- Beta 0.85, market −10%
- about −8.5%
- Beta 1.2, market +10%
- about +12%
- Estimated beta: monthly market returns 2, −3, 4, 1, −2, 3 (%) vs. stock 3, −4, 5, 1, −3, 4 (%)
- 1.34 (covariance ÷ market variance)
Beta scales the market's move, but only as a historical tendency. Real stock moves include plenty that has nothing to do with the market.
Hypothetical figures calculated in code. Past beta does not predict future moves.
#What does beta not measure?
Beta captures only market-related movement. FINRA points out that a stock can have high volatility but a low beta if its moves do not line up with the market's [1]. A small company hit by its own bad news can plunge while the market is calm, and beta would not have warned you. For total swings, look at volatility and standard deviation.
#Is a high-beta stock better or worse?
Neither by itself. FINRA notes that higher beta comes with higher risk and the potential for higher returns, while lower beta often means less upside in rallies though it may protect capital in downturns [1]. Which fits depends on your goals and time horizon; see investment risk types.
Related terms
Frequently asked questions
Does every stock have the same beta on every website?
No. Beta depends on the benchmark, the time period and whether daily, weekly or monthly returns are used, so different sources can show different numbers for the same stock.
Do funds have a beta?
Yes. A fund's beta compares its returns with a benchmark in the same way. A broad index fund tracking that benchmark will have a beta close to 1 against it.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- FINRA. Volatility (2026). Accessed 2026-10-03.A
- S&P Dow Jones Indices. S&P 500 (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
