Beta estimates how sensitive a stock is to market swings. A beta near 1 suggests the share often moves roughly in line with the market index. Above 1 points to larger moves in the same direction; below 1 points to milder moves. Beta is calculated from past data, so it can change and never promises future behaviour.
Key takeaways
- Beta is relative to a chosen market benchmark, not a universal constant.
- High beta can mean bigger gains in rallies and deeper losses in sell-offs.
- A low beta stock can still fall hard for company-specific reasons.
- Use beta as one risk clue among many, not as a full risk model.