1. What is Portfolio Beta?

Portfolio beta measures the systematic risk of an investment portfolio relative to the overall market. A beta of 1 means the portfolio moves with the market, less than 1 means less volatile than the market, and greater than 1 means more volatile.

2. How Does the Calculator Work?

The calculator uses the weighted average of individual stock betas:

Where:

• \( Weight_i \) — Proportion of portfolio invested in stock i (as decimal)
• \( Beta_i \) — Beta coefficient of stock i

Explanation: The portfolio beta is the sum of each stock's beta multiplied by its weight in the portfolio.

3. Importance of Portfolio Beta

Details: Portfolio beta helps investors understand their portfolio's market risk exposure and is used in the Capital Asset Pricing Model (CAPM) to calculate expected returns.

4. Using the Calculator

Tips: Enter each stock's weight (as decimal between 0-1, must sum to 1) and its beta coefficient. Add or remove stocks as needed using the stock count control.

5. Frequently Asked Questions (FAQ)

Q1: What does a beta of 1.5 mean?
A: A beta of 1.5 means the portfolio is expected to be 50% more volatile than the market. If the market rises 10%, the portfolio might rise 15%, and vice versa.

Q2: How do I get individual stock betas?
A: Stock betas are typically available from financial websites like Yahoo Finance, Bloomberg, or your brokerage platform.

Q3: What's considered a "good" beta?
A: It depends on your risk tolerance. Conservative investors prefer lower betas (0.5-1), while aggressive investors might seek higher betas (1-2).

Q4: Does beta measure all risk?
A: No, beta only measures systematic (market) risk, not unsystematic (company-specific) risk which can be diversified away.

Q5: How often should I calculate my portfolio beta?
A: Recalculate when you make significant changes to your portfolio allocation or when individual stock betas change substantially.