Beta shows how sensitive a stock is to market movements. It compares a stock’s price changes to a benchmark like a broad index.
Think of the market as the main soundtrack. Beta tells you whether a stock dances harder, softer, or in sync with that beat.
Beta helps you understand risk and expected volatility. A higher beta means bigger swings, which can boost gains in strong markets but deepen losses in downturns.
Knowing a stock’s beta helps align choices with your strategy and time horizon, especially when building a balanced portfolio instead of reacting to every market move.
Beta is measured relative to a market benchmark, usually an index like the S&P 500:
- Beta = 1.0: moves roughly in line with the market
- Beta > 1.0: more volatile than the market
- Beta < 1.0: less volatile than the market
- Negative beta: tends to move opposite the market
Beta is backward-looking. It’s based on historical data, so it describes past behavior, not guaranteed future moves.
A common mistake is treating beta as a prediction. It explains sensitivity, not direction or timing.
Another error is ignoring context. Beta can change over time and varies by market cycle, sector, and conditions, so relying on a single number can be misleading.
On Stoxcraft, beta appears on stock pages and within portfolio insights in the Stoxcraft Portfolio to help explain price sensitivity and market exposure.
It also feeds into the Risk Score on Stoxcards, where beta is used alongside other indicators to provide context for volatility, portfolio balance, and how individual stocks may behave in different market environments.
