How to Calculate Stock Beta in Excel

Beta (β) measures the volatility of a stock in relation to a market such as S&P 500 or any other index. It is an important measure to gauge the risk of a security.

The market itself is considered to have a Beta of 1. Using regression analysis, the beta of the stock is calculated. If the beta of the stock is greater than 1, this means the stock’s prices are more volatile than the market, and vice verse. For example, if a stock has a beta of 1.2, this means that a 1% change in the market index will bring about a 1.2% change in the stock’s price. Stocks with high beta are considered to be more risky compared to the ones with low beta.

Formula:

$\beta = Covar \left ( r_{s}-r_{m} \right )/Var\left ( r_{m} \right )$