Beta is calculated by comparing the returns of a stock to the returns of a benchmark index, typically the S&P 500. The formula for beta is:
[ \beta = \frac{\text{Covariance}(\text{Stock Returns}, \text{Market Returns})}{\text{Variance}(\text{Market Returns})} ]
For example, if a stock has a covariance with the market of 0.02 and the variance of the market returns is 0.01, the beta would be calculated as 0.02 / 0.01 = 2. This indicates that the stock is twice as volatile as the market.
Check out these websites: http://faculty.babson.edu/academic/Beta/CalculateBeta.htm http://www.money-zine.com/Investing/Stocks/Stock-Beta-and-Volatility/
Say, you hold 1,000 shares of Bharti Airtel, 300 shares of Infosys, 500 shares of Reliance Industries and 700 shares of Hindustan Unilever. In order to completely hedge the portfolio, you need to arrive at the total beta value of your holdings. To begin with, get the beta of individual stocks against the index (available in NSE monthly newsletters). Now, multiply individual beta value of stocks to the current value of investment in that stock. Then, divide the sum of all these numbers with the total value of your investment (current) to arrive at the overall beta of your portfolio.
Beta measures a stock's volatility (the swings up and down in price). The market as a whole has a beta of 1.0, but each stock is determined a beta value from a history of it's stock movements. Riskiness equates to the stock losing value and high beta stocks are more prone to falling faster.
To calculate the expected return of a portfolio of stocks, multiply the expected return of each stock by its respective weight in the portfolio and sum these values. For volatility, first determine the covariance between the stock returns, then use these covariances along with the weights to compute the portfolio's variance, which is the sum of the weighted variances and covariances. Finally, take the square root of the variance to obtain the portfolio's volatility. This process involves using statistical measures such as the mean return and standard deviation of individual stock returns.
"beta burns" are shallow surface burns
Check out these websites: http://faculty.babson.edu/academic/Beta/CalculateBeta.htm http://www.money-zine.com/Investing/Stocks/Stock-Beta-and-Volatility/
Say, you hold 1,000 shares of Bharti Airtel, 300 shares of Infosys, 500 shares of Reliance Industries and 700 shares of Hindustan Unilever. In order to completely hedge the portfolio, you need to arrive at the total beta value of your holdings. To begin with, get the beta of individual stocks against the index (available in NSE monthly newsletters). Now, multiply individual beta value of stocks to the current value of investment in that stock. Then, divide the sum of all these numbers with the total value of your investment (current) to arrive at the overall beta of your portfolio.
Investing in high beta stocks can be risky as they tend to be more volatile than the overall market. It's important to carefully consider your risk tolerance and investment goals before deciding where to invest in high beta stocks. Consulting with a financial advisor can help you make informed decisions based on your individual circumstances.
beta dc= ic/ib!!
Say $10MM holding of 10 stocks, with beta (to S&P500) 0.90. Then beta adjusted exposure (to S&P500 as the benchmark market) is $9MM.
calculate the effective return (mean return minus the risk free rate) divided by the beta. the excel spreadsheet in the related link has an example.
It is impossible to calculate a Betta. A Betta is a fish.
Nice
High-beta stocks
False
To calculate the portfolio beta by weighting individual stock's betas, you would multiply each stock's beta by its weight in the portfolio, and then sum up these values to get the overall portfolio beta.
4