What it is
Beta is a measure of a stock's or portfolio's sensitivity to market movements, representing its systematic risk. A beta of 1 indicates the asset's price moves with the market. A beta greater than 1 suggests the asset is more volatile than the market, tending to rise and fall more sharply. A beta less than 1 means it's less volatile. A negative beta implies movement opposite to the market.
Investors use beta to understand how an investment might behave during broad market swings. High-beta stocks are often favored in bull markets for their potential for greater gains but carry higher risk in bear markets. Conversely, low-beta stocks may offer more stability. Beta is a key input in portfolio construction and risk management, helping investors diversify and manage overall portfolio volatility.
Why it matters
Beta helps you understand a stock's sensitivity to market changes. Use it to gauge risk and diversify your portfolio effectively.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice