Portfolio Beta Calculator - Understanding Risk of Your Investments

Portfolio Beta Calculator

1st stock weight (%)

1st stock beta

2nd stock weight (%)

2nd stock beta

Result

Beta Value	Interpretation
<1	The portfolio is less volatile than the market, and will likely experience smaller price swings than the overall market.
1-1	The portfolio has the same level of volatility as the market, and will likely experience price swings in line with the overall market.
>1	The portfolio is more volatile than the market, and will likely experience larger price swings than the overall market.

Consult Your Doctors for Further Investigation

Portfolio Beta Calculator measures the expected move in stock relative to movements in the overall market.

Portfolio Beta Calculator Overview

A portfolio beta calculator helps investors to calculate the beta of their investment portfolio.
Beta is a measure of the volatility, or risk, of an investment in relation to the market as a whole.
A beta of 1 means the investment moves in line with the market, while a beta greater than 1 indicates higher volatility and a beta less than 1 indicates lower volatility.

What is the beta of a portfolio?

Beta is a measure of an investment's volatility in relation to the market as a whole.

The beta of a portfolio is a weighted average of the betas of the individual assets in the portfolio, with the weights determined by the percentage of each asset's value in the portfolio.
A portfolio with a beta of 1 move in line with the market, while a portfolio with a beta greater than 1 is more volatile than the market and a portfolio with a beta less than 1 is less volatile than the market.
The beta of a portfolio can be calculated manually by multiplying the weight of each asset by its beta and summing the results, or by using an online portfolio beta calculator that automates the calculation process.
By understanding the beta of a portfolio, investors can better manage their risk and make informed decisions about diversification and asset allocation.

Steps To Calculate Portfolio Beta

Here are steps to calculate portfolio beta.

Enter 1st Stock Weight (%)
Enter 1st Stock Beta
Enter 2nd Stock Weight (%)
Enter 2nd Stock Beta
Calculate Your Current Portfolio Allocation

Portfolio Beta Formula

Here is a formula for Portfolio beta.

βp=β1×ω1+β1×ω1+...+ βn×ωn

where:

βn – Represents the beta of the n-th asset/stock in your portfolio.
ωi – Represents the asset allocation percentage (concentration) of this stock in your portfolio.

How To Calculate Portfolio Beta

Assume you have a portfolio consisting of two assets:

Stock A, which represents 60% of the portfolio and has a beta of 1.2
Stock B, which represents 40% of the portfolio and has a beta of 0.8

To calculate the beta of the portfolio, you can use the following formula:

Portfolio Beta = (Weight of Stock A * Beta of Stock A) + (Weight of Stock B * Beta of Stock B)

Substituting the values from the example:

Portfolio Beta = (0.6 * 1.2) + (0.4 * 0.8)

Portfolio Beta = 0.72 + 0.32

Portfolio Beta = 1.04

Therefore, the beta of the portfolio is 1.04. This means that the portfolio is slightly more volatile than the market, as a beta of 1 indicates that the portfolio moves in line with the market. Investors can use this information to make decisions about risk management and asset allocation.

How to interpret the beta of a portfolio?

Sure, here's an example of interpreting the beta of a portfolio:

Beta Value	Interpretation
Beta < 1	The portfolio is less volatile than the market, and will likely experience smaller price swings than the overall market.
Beta = 1	The portfolio has the same level of volatility as the market, and will likely experience price swings in line with the overall market.
Beta > 1	The portfolio is more volatile than the market, and will likely experience larger price swings than the overall market.

Portfolio Beta Calculator Risk Free Rate And Market Risk Premium

Here are the basic Risk Free Rate And Market Risk Premium Value.

Input	Example Value	Description
Risk-Free Rate	2.0%	The rate of return on a risk-free investment, such as a government bond.
Market Risk Premium	5.0%	The expected excess return of the overall market over the risk-free rate.

Note: The example values provided are for illustrative purposes only and should be updated with current market data when using a portfolio beta calculator.

Portfolio Beta Calculator Benefits

Here are the benefits of using a portfolio beta calculator.

Helps investors understand the risk of their portfolio: A portfolio beta calculator helps investors calculate the beta of their portfolio, which is a measure of the portfolio's volatility in relation to the market as a whole.
Saves time and reduces errors: Manually calculating the beta of a portfolio can be time-consuming and prone to errors. A portfolio beta calculator automates the calculation process, saving time and reducing the likelihood of mistakes.
Allows for easy adjustments to the portfolio: With a portfolio beta calculator, investors can easily update the weights and betas of their portfolio to reflect changes in their holdings.
Provides a benchmark for comparison: By comparing the beta of a portfolio to a benchmark, such as the S&P 500, investors can see how their portfolio is performing relative to the market.

Summary

Overall, using a portfolio beta calculator can help investors save time, reduce errors, and make informed decisions about their investments based on a clear understanding of the risk of their portfolio. Check More Finance Related Calculator on Drlogy Calculator to get exact business and financial solutions for growth.

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