Beta

How a stock's movement correlates to the movement of the overall stock market is measured by beta. Beta is related to but is not the same as volatility.

Beta for the overall market is set to a value of one, then stocks with greater Beta than one have a higher volatility than the overall market. This is riskier than the market with a higher probability of outperforming the market, because this could provide greater returns in an up market and greater losses in the down market. There is a 30% higher volatility than the overall market when Beta is equal to 1.3. This equity would be expected to have moved up about 13%, if the market moved up 10% over a specific period of time. Stocks with Beta less than one, have a lower volatility than the overall market. Equities with negative Beta tend to move downward if the market goes up (opposite direction), and they tend to move upward if the market goes down (opposite direction).