Beta (finance)

Beta is a financial measurement of an assets' sensitivity to a certain weight. Typically, this weight is the S&P 500. Beta uses past performance, and cannot predict future results. 

 Examples 

 Rio Tinto has a beta of 0.55 (On NYSE), meaning that if the S&P 500 moves up 20%, theoretically, Rio Tinto moves up 11%.
 The SARK ETF has a beta of -2. If the market drops by 6%, SARK may go up 12%.

 Formula 
Beta is calculated by dividing the covariance of returns between the index, and the stock, to the variance for the index returns.
References

Category:Finance