Beta

Beta measures how much a stock tends to move relative to the overall market. A beta of 1 means it moves in line with the market, above 1 means it is more volatile, and below 1 means it is steadier. It is a common gauge of a stock systematic, or market-related, risk.

Use beta to understand how a stock might behave in market swings and to shape a portfolio risk profile. High-beta stocks can amplify gains in rallies and losses in declines, while low-beta stocks tend to be more defensive. Beta is backward-looking and can change over time, so treat it as a guide, not a guarantee.

A stock with a beta of 1.5 would, on average, rise about 15 percent when the market rises 10 percent and fall about 15 percent when the market falls 10 percent, making it more volatile than the market.