What is Portfolio Beta?
Beta (β) measures how much a stock or portfolio moves relative to the overall market (e.g., S&P 500). A portfolio beta is the weighted average of its individual holdings' betas. Beta 1.0 means the portfolio tracks the market exactly; 0.7 means it moves only 70% as much; 1.5 means 50% more volatility in both directions.
Formula: Portfolio Beta = Σ(Weight_i × Beta_i) / Σ(Weight_i). Weights don't need to sum to 100% — the calculator normalizes automatically. Conservative investors typically target a beta below 0.8; growth investors may accept 1.2+ for higher return potential.
Frequently Asked Questions
Yes. Assets like gold, inverse ETFs, or some defensive bonds may have negative betas, meaning they tend to rise when the market falls. Adding them can reduce portfolio beta and act as a hedge.
Yes. Beta is calculated from historical returns and can shift as a company's business model, leverage, or market dynamics change. Always use recent beta estimates for current risk assessment.