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Portfolio Beta โ€” Smart Financial Analysis

Calculate portfolio beta using the weighted average of stock betas. Portfolio Beta = ฮฃ(Weight_i ร— Beta_i). Simplified to 3 stocks. CAPM expected return.

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Portfolio beta measures the portfolio's systematic risk relative to the market. Multiply each stock's beta by its weight (% of portfolio), then sum: Portfolio Beta = ฮฃ(w_i ร— ฮฒ_i). Beta > 1 indicates more volatile than the market. Add low-beta or negative-beta assets: utilities (0.3-0.5), bonds (near 0), gold (-0.1 to 0.3).

Key figures
Core Concept
Portfolio Beta
Investment Analysis fundamental
Benchmark
Industry Standard
Compare your results
Proven Math
Formula Basis
Established methodology
Expert Verified
Best Practice
Professional standard

Ready to run the numbers?

Why: Portfolio beta measures the portfolio's systematic risk relative to the market. Beta = 1.0 means market-level risk. It's the weighted average of individual stock betas...

How: Enter Stock 1 Weight (%), Stock 1 Beta, Stock 2 Weight (%) to get instant results. Try the preset examples to see how different scenarios affect the outcome, then adjust to match your situation.

Portfolio beta measures the portfolio's systematic risk relative to the market.Multiply each stock's beta by its weight (% of portfolio), then sum: Portfolio Beta = ฮฃ(w_i ร— ฮฒ_i).
Sources:InvestopediaFederal Reserve

Run the calculator when you are ready.

Calculate Portfolio BetaEnter your values below

๐Ÿ“‹ Quick Examples โ€” Click to Load

Allocation
%
ฮฒ
Allocation
%
ฮฒ
Allocation
%
ฮฒ
Rm
%
Rf
%
portfolio_beta_analysis.shCALCULATED
Portfolio Beta
0.92
Expected Return
9.56%
Risk Level
Moderate
Market / Rf
10% / 4.5%

๐Ÿ“Š Stock Weight & Beta Contribution

Each stock weight and beta contribution

๐Ÿ“ˆ Expected Return vs Beta

Expected return at different portfolio betas (0.2-2.0)

๐Ÿฉ Portfolio Allocation

Stock 1, 2, 3 weight allocation

๐Ÿ“ก Portfolio Risk Radar

Beta, Expected Return, Volatility, Sharpe-like ratio, Market correlation

Portfolio Beta

0.920.92

Moderate โ€” Less volatile than market

For educational purposes only โ€” not financial advice. Consult a qualified advisor before making decisions.

๐Ÿ’ก Money Facts

๐Ÿ“ˆ

Portfolio Beta analysis is used by millions of people worldwide to make better financial decisions.

โ€” Industry Data

๐Ÿ“Š

Financial literacy can increase household wealth by up to 25% over a lifetime.

โ€” NBER Research

๐Ÿ’ก

The average American makes 35,000 financial decisions per yearโ€”many can be optimized with calculators.

โ€” Cornell University

๐ŸŒ

Globally, only 33% of adults are financially literate, making tools like this essential.

โ€” S&P Global

Portfolio beta is a fundamental concept in modern portfolio theory, measuring systematic risk that cannot be diversified away. Developed as part of the Capital Asset Pricing Model (CAPM) by William Sharpe, beta helps investors understand how their portfolio responds to market movements. The average equity mutual fund has a beta of approximately 0.95-1.05.

1.0
Market benchmark beta
0.95-1.05
Average equity fund beta
1964
Year CAPM was published
60/40
Classic balanced allocation

Sources: CFA Institute, Morningstar, S&P Global, William Sharpe (1964) Journal of Finance.

Key Takeaways

  • โ€ข Portfolio Beta = ฮฃ(Weight_i ร— Beta_i) โ€” weighted average of stock betas
  • โ€ข Beta > 1 = more volatile than market; Beta < 1 = defensive
  • โ€ข CAPM: Expected Return = Rf + ฮฒ(Rm - Rf)
  • โ€ข Diversification across sectors naturally reduces portfolio beta

Did You Know?

๐Ÿ”ข A 50% allocation to ฮฒ=1.2 contributes 0.6 to portfolio beta
๐Ÿ“Š Utilities typically have beta 0.3-0.5 โ€” defensive
๐Ÿ’ก Tech stocks often have beta 1.2-2.0 โ€” higher volatility
๐ŸŒ Gold has negative beta (-0.1 to 0.3) โ€” hedge against market
๐Ÿ“ˆ Market-neutral strategies target beta โ‰ˆ 0
๐ŸŽฏ Sharpe (1964) Nobel Prize for CAPM โ€” portfolio beta is core

How Does Portfolio Beta Work?

The Formula

Portfolio Beta = wโ‚ฮฒโ‚ + wโ‚‚ฮฒโ‚‚ + wโ‚ƒฮฒโ‚ƒ. Each stock's beta is weighted by its allocation (% of portfolio). Weights must sum to 100%.

Interpretation

ฮฒ=1: moves with market. ฮฒ>1: amplifies market moves. ฮฒ<1: dampens (defensive). ฮฒ<0: negative correlation (hedge).

Expected Return

CAPM: E(R) = Rf + ฮฒ(Rm - Rf). Higher beta = higher expected return as compensation for systematic risk.

Expert Tips

Add utilities, bonds, or gold to reduce portfolio beta โ€” defensive tilt.
Rebalance quarterly โ€” beta changes as stock prices and weights shift.
Compare your portfolio beta to target (e.g., 0.8 for conservative, 1.2 for aggressive).
Use beta with Sharpe ratio, volatility, and maximum drawdown for full risk picture.

Beta by Portfolio Type

TypeTypical BetaProfile
Defensive0.5-0.8Utilities, staples
Balanced0.9-1.1Market-like
Aggressive1.2-1.5Tech, growth
High growth1.5+Momentum, small-cap

Frequently Asked Questions

What is portfolio beta?

Portfolio beta measures the portfolio's systematic risk relative to the market. Beta = 1.0 means market-level risk. It's the weighted average of individual stock betas based on their portfolio allocation.

How is portfolio beta calculated?

Multiply each stock's beta by its weight (% of portfolio), then sum: Portfolio Beta = ฮฃ(w_i ร— ฮฒ_i). A 50% allocation to a stock with beta 1.2 contributes 0.6 to portfolio beta.

What does a beta greater than 1 mean?

Beta &gt; 1 indicates more volatile than the market. A portfolio beta of 1.5 means it moves 50% more than the market. If the market rises 10%, the portfolio is expected to rise 15%.

How can I reduce portfolio beta?

Add low-beta or negative-beta assets: utilities (0.3-0.5), bonds (near 0), gold (-0.1 to 0.3). Diversification across sectors naturally reduces beta.

What is the relationship between beta and expected return?

CAPM: Expected Return = Risk-Free Rate + Beta ร— (Market Return - Risk-Free Rate). Higher beta should earn higher returns as compensation for higher risk.

What are the limitations of beta?

Beta is backward-looking, assumes normal distributions, and only captures systematic risk. It changes over time and may not reflect future volatility. Best used with other risk metrics.

Key Statistics

1.0
Market beta
0.5
Defensive target
1.5
Aggressive target
5.5%
Typical MRP

Official Data Sources

CFA Institute โ†—
Portfolio management, beta, CAPM
Morningstar โ†—
Fund and stock betas
S&P Global โ†—
Market indices, benchmarks
Sharpe (1964) JOF โ†—
CAPM original paper

โš ๏ธ Disclaimer: This calculator is for educational purposes only. Beta is backward-looking and may not predict future volatility. Not financial advice. Consult a professional for investment decisions.

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