Beta is an investment metric that measures a stock’s sensitivity to movements in the overall market.
In the standard market model, a beta of 1 suggests the investment has historically moved with the chosen market benchmark. A beta above 1 indicates greater historical sensitivity, while a beta below 1 indicates less sensitivity. A negative beta would imply a tendency to move in the opposite direction, though such relationships can be unstable.
Beta is a statistical estimate, not a promise about future performance. It depends on the time period, return frequency, and benchmark used in its calculation. Beta also measures market-related volatility rather than all risk: company-specific events, liquidity problems, and changing business conditions may not be captured well by a single beta figure.