The beta for individual stocks is readily available on the websites of most online discount brokerages or reliable publishers of investment research. Beta is a measure of the volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole. (Thus, if Amazon comprises 25% of your portfolio and has a beta of 1.43, it has a weighted beta of 0.3575.). Accessed March 16, 2020. Add up the value (number of shares x share price) of each stock you own and your entire portfolio. For example, a stock with a beta of 1.2 is 20% more volatile than the market. For most portfolios, the S&P 500 is a reasonable index to start with. What Are the Easiest Ways to Track Your Investments? Calculating beta of your portfolio isn’t really complicated and you can use basic mathematics to calculate it. While our example below discusses beta in the context of stocks, beta can be calculated for bonds, mutual funds, exchange-traded funds, and other investments. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. What Do Market Indexes Say About Investing? This is called a weighted average.. Let’s say a portfolio has three stocks A, B and C, with portfolio weights as 10%, 30%, and 60% respectively. For this reason, an investor may wish to calculate beta themselves to get a more precise answer. Follow these basic steps: Fidelity Investments. Nasdaq. Nasdaq. Using a six month time period to calculate one stocks beta and a six year period to calculate the other will give you a much different result than using the same time period across the board. To calculate the beta of a portfolio, you need to first calculate the beta of each stock in the portfolio. The beta represents the sensitivity of a given stock to the changes occurring in the market overall. The beta score changes as the volatility of the stock changes compared to the volatility of the market. Add the weighted beta of the replacement stock to the weighted beta of the portion of the portfolio that you kept to calculate the new beta of the portfolio. As you can see, adding up the weighted beta figures in the right column results in a beta of about 1.01, meaning this portfolio has a volatility very much in line with the S&P 500. Calculating beta of your portfolio isn’t really complicated and you can use basic mathematics to calculate it. Diversification can also help reduce the volatility in your portfolios, allowing you to see steady growth without wild swings in the value of your savings. It’s important to understand that beta can be calculated over various time periods. How to Calculate the Beta Coefficient. The Ascent is The Motley Fool's new personal finance brand devoted to helping you live a richer life. It's an easy way to quickly assess your entire portfolio's volatility. In this example, add 0.18 to 0.59 to get a new beta of 0.77. Every stock you own has a beta score. The beta of Portfolio = Weight of Stock * Beta of Stock + Weight of Stock * Beta of Stock…so on Let us see an example to calculate the same. "Glossary of Stock Market Terms - Portfolio Beta ." Accessed March 16, 2020. Calculating the volatility, or beta, of your stock portfolio is probably easier than you think. To determine the beta of an entire portfolio of stocks, you can follow these four steps: Let’s illustrate this by calculating the beta on this fictional portfolio of six stocks. According to Investopedia, Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.In this post, we’re going to learn how to calculate beta coefficient of our desired stocks using historical price data that is publicly available. In order to calculate the weighted average of your beta, you need to know how much money you have in each stock and the beta for each stock. Steps to Calculate Beta for a Stock Portfolio, How to Calculate Beta for Individual Stocks. Perhaps the most important thing to consider when building an investment portfolio is your level of diversification. "All About Alpha, Beta, and Smart Beta." Then you take the weighted average of betas of all stocks to calculate the beta of the portfolio. calculate the beta for an arbitrary portfolio, even though being able to do so has immense practical benefit. It is used in the capital asset pricing model. Multiply those percentage figures by the appropriate beta for each stock. Portfolio beta is a measure of the overall systematic risk of a portfolio of investments. Some models for calculating a stock’s beta are very complex, but we’ll use the most straightforward approach here. Let's conquer your financial goals together...faster. A higher beta indicates great volatility, and a lower beta indicates less volatility. Then plug in a formula to determine how the stock and index move together and how the index moves by itself. The beta for individual stocks is readily available on the websites of most online discount brokerages or reliable publishers of investment research. Steps to Calculate Beta for a Stock Portfolio . To determine the beta of an entire portfolio of stocks, you can follow these four steps: Portfolio beta is a measure of the overall systematic risk of a portfolio of investments. Then do the same thing for the index you are comparing against.