Do you ever consider the Beta of a Stock before you invest?

[Trade Up 10]

I have looked at many different elements to trading, but one which I have not seen mentioned on the Forum is Stock Betas.

 

The beta of a stock is the correlation the stock has with the market (or any other method of comparison, e.g. interest rates, etc). A strict definition of correlation is :-

 

A correlation is a single number that describes the degree of relationship between two variables

 

A beta is not a fixed number, and is based on historical data which will change going forward.

 

I am going to leave the rest fairly blank, as I always think it is interesting to hear peoples views, without leading them in a certain direction.

[Follow The Trend 10]

Diversification and betas are very closely linked, if you buy a number of stocks. You can integrate different betas to give a different angle on the market.

 

One stock beta in itself has the potential to be more volatile, although there are stocks with a beta which will follow the market closely, some perform directly opposite to the market.

 

If you are a trader, you should really be looking at betas.