— Stock Market
Beta Calculator
Calculate a stock’s beta, its movement relative to the market. Paste stock and market returns to compute beta as the regression slope, with alpha and R², or enter covariance and market variance directly.
Beta (β)
1.45
- Adjusted beta (Blume)
- 1.3
- Alpha (per period)
- -0.41%
- R²
- 99.33%
Try: From a 5-period series, Unlever it (D/E 0.5, 30% tax), From covariance & variance, A defensive stock
— Return periods
| Period | Stock return | Market return |
|---|---|---|
| 1 | 5% | 4% |
| 2 | -2% | -1% |
| 3 | 8% | 6% |
| 4 | 3% | 2% |
| 5 | 10% | 7% |
— How it works
Beta = covariance(stock, market) ÷ variance(market) — the slope of stock returns regressed on market returns. Alpha = the regression intercept. R² = correlation². Adjusted beta (Blume) = 0.67 × beta + 0.33. Unlevered beta (Hamada) = beta ÷ (1 + (1 − tax) × debt/equity).
What beta means
Beta is the slope of a line fitted through a scatter of the stock’s returns against the market’s: how much the stock tends to move for each 1% the market moves. A beta of 1.5 means it has historically moved 1.5% for every 1% market move — more volatile, more risk, and in CAPM a higher required return. A beta of 0.7 is defensive; a negative beta (rare — think gold miners or some hedges) moves against the market. It captures only systematic risk — the part you can’t diversify away — which is exactly what CAPM prices.
Worked example — stock returns 5, −2, 8, 3, 10% against market 4, −1, 6, 2, 7%: Covariance ÷ market variance = 59.6 ÷ 41.2 ≈ 1.45. The stock is about 45% more volatile than the market, and the regression explains 99% of its moves (high R²).
Alpha, R² and adjusted beta
The same regression yields two more numbers. Alpha is the intercept — the average return the market doesn’t explain, a rough gauge of out- or under-performance. R² tells you how much of the stock’s movement the market accounts for: a high R² means beta is meaningful, a low one means the stock marches to its own drum and beta should be trusted less. Because betas tend to drift toward 1 over time, analysts often use the Blume adjusted beta — 0.67 × raw + 0.33 — for forward-looking estimates like CAPM.
Levered vs unlevered beta
A company’s beta reflects both its business risk and its debt. Unlevering (the Hamada equation) strips out the leverage to leave the asset beta — the business risk alone — which is useful for comparing companies with different capital structures, or for valuing a division. Enter a debt/equity ratio and tax rate to see it. As with any historical measure, beta depends on the period, frequency and index you measure against, and the past doesn’t bind the future — so treat it as an estimate, not a constant. Not investment advice. The result feeds the CAPM calculator’s required return.
— Reader questions
How is beta calculated?
Beta = covariance between the stock’s and the market’s returns ÷ the variance of the market’s returns. Equivalently, it’s the slope of a regression of the stock’s returns on the market’s. Enter a returns series and the calculator does both.
What does a beta of 1.5 mean?
The stock has historically moved about 1.5% for every 1% move in the market — 50% more volatile, with more risk and, in CAPM, a higher required return. A beta below 1 is less volatile; a negative beta moves opposite to the market.
What is adjusted (Blume) beta?
A forecast adjustment, 0.67 × raw beta + 0.33, that nudges beta toward 1 because betas tend to drift toward the market over time. It’s commonly used for forward-looking estimates like the cost of equity.
What is unlevered beta?
Beta with the effect of debt removed (the Hamada equation), leaving the underlying business risk. It lets you compare companies with different debt levels, or re-lever to a target capital structure. It needs a debt/equity ratio and tax rate.
What does R² tell me about beta?
How much of the stock’s movement the market explains. A high R² means beta is a reliable measure of its market sensitivity; a low R² means much of the stock’s movement is specific to it, so beta tells you less.