Beta is a statistical measure of a stock's or asset's volatility relative to the overall market, typically represented by a benchmark index like the S&P 500. A beta of 1 means the asset tends to move in line with the market, above 1 indicates greater volatility, and below 1 indicates less volatility. Negative beta values, though rare, indicate an asset that moves inversely to the market. Investors use beta to assess risk and construct portfolios aligned with their risk tolerance.
Example
“Tesla has a beta above 1, meaning it tends to experience larger swings than the overall market during both rallies and selloffs.”