Risk and return · updated October 21, 2026
What is a stock's beta and how is it calculated
Beta shows how much a stock moves, on average, when the market goes up or down by 1%. A beta of 1.5 means the stock tends to rise 1.5% when the market rises 1%, and fall 1.5% when the market falls 1%.
Beta formula
- Covariance
- How much the stock and the market move in the same direction at the same time.
- Market variance
- How much the market moves on its own.
- The market
- The country's main index (S&P 500 in the US, BET in Romania).
Worked example
The market falls 10% in a month. A stock with a beta of 1.3 tends to fall about 13%, and one with a beta of 0.6 about 6%.
Beta describes an average tendency, not what will happen on a given day.
How to read beta
On our pages you also see downside beta, calculated only from days when the market fell. A stock with a low downside beta protects you better when the market drops.
When beta can fool you
Low beta does not mean low risk: a company with its own problems can fall a lot even while the market rises. It changes over time, depending on the period used.
Related terms
Questions about beta
What is a good beta?
It depends on what you want. For a calm portfolio, a beta below 1. For bigger gains in rising markets, above 1, with bigger drops in falling markets.
These explanations are for information only. They are not a recommendation to buy or sell.
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