Beta Calculator

Beta coefficient is another term for the beta. It is a measure of the risk of a stock or portfolio in comparison to the market risk. The CAPM (Capital Asset Pricing Model) uses the beta coefficient. It only takes systematic risk into account as it is related to the whole economy and not to a specific industry. And hence, we cannot avoid it. Beta Calculator helps in making calculations easier.

To calculate the beta of a security or portfolio, we divide the covariance between the return of security and market return by the variance of the market return.

The formula of beta is as follows:

Beta = Covariance (rs, rm) / Variance (rm)

Where,

rs = Return on Security

rm = Market Return

About the Calculator / Features

The beta calculator is an easy-to-go online tool that quickly calculates the beta coefficient by simply inserting the following figures into it:

  • Covariance (rs, rm)
  • Variance (rm)

Beta Calculator

How to Calculate using Beta Calculator

The user has to simply provide the following details into the calculator for a quick result of the calculation.

  • Covariance

Covariance is a tool for measuring the statistical relationships between two different variables. The result of covariance lies between -∞ to +∞. The formula for calculating Covariance is as follows:

Covariance = ∑ (xi – x̄) (yi – ȳ) / (n – 1)
Where, x & y = data value of x & y respectively.
x̄ = Average of data values of x
ȳ = Average of data values of y
n = number of data values

  • Variance

Variance is the square of standard deviation. It is denoted as (σ2). It is the total of each value in the data set subtracted by the average of the data set and divided by the total numbers in the data set less one. The variance can be calculated by using the following formula:

Variance = ∑ (xi – x̄)2 / (n – 1)

Excel Calculator – Beta

You can also download our excel based calculator for beta.

Excel Calculator for Beta (115 downloads )


Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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