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Enter the company return and market return into this tool to calculate the beta of the company instantly.
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Our advanced stock beta calculator helps you measure the sensitivity of a company’s stock returns relative to the overall market. Using historical return data, the tool applies regression analysis to provide an accurate beta value.
In financial terms:
“Beta indicates how much a stock’s price fluctuates compared to the market.”
Knowing the beta of a stock helps investors and analysts assess risk and make informed decisions.
Consider a company and the market with the following historical returns:
Company Returns: 3, 5, 2, 10, 7, 4
Market Returns: 4, 6, 3, 8, 5, 6
We want to calculate the stock’s beta to understand its volatility compared to the market.
| Obs. | Market Return (X) | Stock Return (Y) |
| 1 | 4 | 3 |
| 2 | 6 | 5 |
| 3 | 3 | 2 |
| 4 | 8 | 10 |
| 5 | 5 | 7 |
| 6 | 6 | 4 |
Next, we compute the regression coefficients for beta:
| Obs. | X | Y | X² | Y² | X·Y |
| 1 | 4 | 3 | 16 | 9 | 12 |
| 2 | 6 | 5 | 36 | 25 | 30 |
| 3 | 3 | 2 | 9 | 4 | 6 |
| 4 | 8 | 10 | 64 | 100 | 80 |
| 5 | 5 | 7 | 25 | 49 | 35 |
| 6 | 6 | 4 | 36 | 16 | 24 |
| Sum = | 32 | 31 | 186 | 203 | 187 |
Formulas for regression sums:
\(SS_{XX} = \sum X_i^2 - \dfrac{(\sum X_i)^2}{n} = 186 - \dfrac{32^2}{6} = 26.667\)
\(SS_{YY} = \sum Y_i^2 - \dfrac{(\sum Y_i)^2}{n} = 203 - \dfrac{31^2}{6} = 49.833\)
\(SS_{XY} = \sum X_iY_i - \dfrac{(\sum X_i)(\sum Y_i)}{n} = 187 - \dfrac{32 \cdot 31}{6} = 33.333\)
Beta of the stock:
\(\hat{\beta} = \dfrac{SS_{XY}}{SS_{XX}} = \dfrac{33.333}{26.667} \approx 1.25\)
Since beta > 1, the stock is more volatile than the market, indicating higher risk but higher potential reward.
Our tool is designed for quick and accurate calculations:
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Output:
Yes, a negative beta indicates the stock moves in the opposite direction of the market, though it is uncommon.
Based on information from Wikipedia: Beta (finance) and other financial analysis sources.
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