How to Determine the Beta of a Portfolio

Beta measures how a stock’s price typically moves relative to the overall stock market. You can determine a portfolio’s beta based on the betas of its individual stocks. A portfolio with a higher beta has more risk than one with a lower beta.

The beta of the stock market is 1. A portfolio beta of 1 suggests its value moves the same as the stock market, while a portfolio beta greater than 1 suggests its value fluctuates more than the stock market. A beta of less than 1 suggests a portfolio is less volatile than the market.

Determine Value of Each Stock

To calculate the beta of a portfolio, first multiply the number of shares of each stock in a portfolio by the stock’s price to determine the value of each stock. You can find a stock’s price on any financial website that provides stock information. For example, assume you own 700 shares of stock in ABC Company at $10 per share and 150 shares of stock in XYZ Company at $20 per share. Multiply 700 by $10 to get $7,000, then multiply 150 by $20 to get $3,000.

Add together the value of each stock in the portfolio to determine the portfolio’s total value. In this example, add $7,000 to $3,000 to get a portfolio value of $10,000.

Divide the value of each stock by the portfolio’s total value to determine the portion of each stock in the portfolio. In this example, divide $7,000 by $10,000 to get a portion of 0.7 for ABC stock. Divide $3,000 by $10,000 to get a portion of 0.3 for XYZ stock.

Combine the Results

Look up the beta of each stock in your portfolio on any financial website that provides stock information. For example, assume ABC stock has a beta of 1.3, and XYZ stock has a beta of 0.4.

Multiply the portion of each stock in the portfolio by its beta. In this example, multiply 0.7 by 1.3 to get 0.91. Multiply 0.3 by 0.4 to get 0.12.

Add together your results to determine the portfolio’s beta. Continuing with the example, add 0.91 to 0.12 to get a portfolio beta of 1.03, which means that the portfolio’s value would move slightly more than, but very close to, the stock market.

Other Beta Considerations

Beta is an estimate based on historical price movements and does not guarantee that a stock or portfolio will behave in any particular way in the future. A portfolio’s value might move in a manner that is inconsistent with its beta.

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