How to Calculate Beta In Excel - All 3 Methods (Regression, Slope & Covariance)

How to Calculate Beta In Excel - All 3 Methods (Regression, Slope & Covariance)

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What is Beta
A stock that swings more than the market over time has a beta greater than 1.0. If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks tend to be riskier but provide the potential for higher returns; low-beta stocks pose less risk but typically yield lower returns.

As a result, beta is often used as a risk-reward measure meaning it helps investors determine how much risk their willing to take to achieve the return for taking on that risk. A stock's price variability is important to consider when assessing risk. If you think of risk as the possibility of a stock losing its value, beta has appeal as a proxy for risk.

How to Calculate Beta
To calculate the beta of a security, the covariance between the return of the security and the return of the market must be known, as well as the variance of the market returns.


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