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**Table of Content**

This advanced stock beta calculator will calculate the beta of a company in accordance with the share market. The tool considers the regression model to compare the return of the firm and market for the same duration of time.

In finance:

**“Beta is regarded as the comparison between the market index and the historical volatility of a company”**

Basically, calculating the beta of a stock helps finance experts to estimate the return for a certain risk they will take.

- If beta > 1.0, it means that the stock has more worth than the market
- If beta < 1.0, it indicates that the stock value is far less than that of the market

A company has invested certain shares in a business for which the stats for both the company and the market are as follows:

**Company’s Return = 2, 1, 4, 25, 4, 4**

**Market’s Return = 2, 7, 6, 8, 2, 7**

Calculate beta to estimate whether the stock’s price goes higher or lower than the market.

As we have the in the following table:

Obs. |
||

1 | 2 | 2 |

2 | 7 | 1 |

3 | 6 | 4 |

4 | 8 | 25 |

5 | 2 | 4 |

6 | 7 | 4 |

Now we will calculate the regression coefficient.

Obs. |
Xᵢ² |
Yᵢ² |
Xᵢ · Yᵢ |
||

1 | 2 | 2 | 4 | 4 | 4 |

2 | 7 | 1 | 49 | 1 | 7 |

3 | 6 | 4 | 36 | 16 | 24 |

4 | 8 | 25 | 64 | 625 | 200 |

5 | 2 | 4 | 4 | 16 | 8 |

6 | 7 | 4 | 49 | 16 | 28 |

Sum = | 32 | 40 | 206 | 678 | 271 |

\(SS_{XX} = \sum^n_{i=1}X_i^2 – \dfrac{1}{n} \left(\sum^n_{i=1}X_i \right)^2\)

\(= 206 – \dfrac{1}{6} (32)^2\)

\(= 35.333\)

\(SS_{YY} = \sum^n_{i=1}Y_i^2 – \dfrac{1}{n} \left(\sum^n_{i=1}Y_i \right)^2\)

\(= 678 – \dfrac{1}{6} (40)^2\)

\(= 411.33\)

\(SS_{XY} = \sum^n_{i=1}X_iY_i – \dfrac{1}{n} \left(\sum^n_{i=1}X_i \right) \left(\sum^n_{i=1}Y_i \right)\)

\(= 271 – \dfrac{1}{6} (32) (40)\)

\(= 57.667\)

\(\hat{\beta}_1 = \dfrac{SS_{XY}}{SS_{XX}}\)

\(= \dfrac{57.667}{35.333}\)

\(= 1.632\)

As the beta value is greater than 1.0, it means that the stock value is higher than the market index.

Our beta portfolio calculator is loaded with a simple user-friendly interface that makes your calculations much easier and swift. Let’s find out how!

**Input:**

- Enter the company’s & market’s returns in their respective boxes
- Tap
**Calculate**

**Output:**

The beta calculator calculates the following results:

- Beta of a company
- Step by step calculations

A negative beta value shows a clear distinction with respect to the market value of an index. But it rarely happens.

From the source Wikipedia: Beta (finance), Interpretation of values, Importance as risk measure, Technical aspects, Choice of market portfolio and risk-free rate, Empirical estimation, Equilibrium use: fair reward for risk?