CONCEPT OF BETA VALUE WITH EXAMPLE
Beta value
very interesting concept
It is a relative measure of the risk of an individual stock relative to the market portfolio of all stocks
The higher the beta, the greater the volatility, and it is considered to be riskier, but is in turn supposed to provide a potential for higher returns
market itself has a beta value of 1, which means the moment is exactly equal to itself (1:1 ratio)
The stocks may have a beta value of less than or equal to or greater than one.
Assets with a beta value of zero mean that it price is not at all correlated with the market the asset is independent
A positive beta asset generally tracks the market
A negative beta means assets inversely follow the market
For example, if the value of beta is 0.80, it means that the company is less volatile than the market its price moves less than the market movement if the price moves 1% up or down, then the company will move .8% of or down now
If the value of beta is 1.2%, then it is more volatile than the market for example, if the market moves 1% up or down, then the company will move 1.2% up or down
One thing to note is that beta is NOT A SURE THING
Beta value of