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Beta & Beta Scans – A Powerful Technical Indicator

StockEdge by StockEdge
February 20, 2022
Reading Time: 4 mins read
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The Beta of a stock measures the stock’s volatility compared to the market or the benchmark index. It measure’s the price sensitivity of a stock in relation to a related benchmark index. The beta of an individual stock gives market participants an indication of how risky the stock is.

The Beta of a stock is calculated as:

Beta = Correlation of Stock Price Return and Index Price Return * (Standard Deviation of Stock Price Return / Standard Deviation of Index Price Return)

The time frame and periodicity used to calculate beta is not fixed and can be altered based on the user’s needs. At StockEdge, we have calculated beta using daily price returns for a period of one year. Beta values give an indication whether a stock will move in the same direction as the market and how risky or volatile it is in relation to the market. The beta of a market or the benchmark index is always 1.

A stock’s beta can be greater than 1, equal to 1, less than 1 and even 0. A value greater than one indicates that the benchmark index and the market will move in the same direction but the stock will be more volatile than the index while a value less than 1 indicates that the benchmark index and stock will move in the same direction but the stock will be less volatile than the index. A negative beta value indicates that the price returns of the benchmark index and stock are inversely related and will move in opposite directions. For eg: Stock Beta of 1.4 indicates that the stock is 40% more volatile than the market and a beta of 0.4 indicates that the stock is only 40% as volatile as the market.

On StockEdge, with the new version update, free and paid users both can now see the beta value of stocks in the Technicals page under the Indicators tab. The beta value will be available against the benchmark index as well as the related sectoral index. Benchmark Beta will give users an idea of how volatile the stock is in relation to the overall market or the benchmark index. The Sectoral Beta will help users to conduct a deeper study to understand how volatile the stock is compared to the sector as a whole.

beta

To aid equity research further, StockEdge is releasing 6 new scans for its paid users. These scans are:

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1.       High Beta – Benchmark Index: This scan will filter out stocks which have a beta greater than 1.4 against the benchmark index.

2.       Low Beta – Benchmark Index: This scan will filter out stocks which have a beta less than 0.3 against the benchmark index.

3.       Negative Beta – Benchmark Index: This scan will filter out stocks which have a negative beta against the benchmark index.

4.       High Beta – Sectoral Index: This scan will filter out stocks which have a beta greater than 1.4 against the sectoral index.

5.       Low Beta – Sectoral Index: This scan will filter out stocks which have a beta less than 0.3 against the sectoral index.

6.       Negative Beta – Sectoral Index: This scan will filter out stocks which have a negative beta against the sectoral index.

stockedge

Beta is an important indicator while doing equity research. At StockEdge, we continuously believe in improving the user’s experience and making the users more financially literate and introducing Beta Value and Beta Scans is an attempt to move a step further to meet our objectives and goals. If you enjoy using StockEdge, don’t hold back from sharing it with your loved ones.

Check out StockEdge’s Premium Plans to get the most out of it.

Also, keep watching this space for our midweek and weekend editions of ‘Trending Stocks‘ and ‘Stock Insights‘.

Tags: betabeta scanscorrelationriskstandard deviationtechnical indicatorvarianceVolatility
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Comments 2

  1. THAKUR ARUN PAL SINGH says:
    3 months ago

    Wow that’s Great to add Beta Scan. Heartiest Gratitude 🌹

    Reply
  2. Uma says:
    3 months ago

    Thank you

    Reply

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