Beta

Beta measures how much an asset moves relative to the whole market. A beta of 1 means it moves in step; 1.5 means it tends to rise 15% when the market rises 10%.

High-beta names are usually technology and growth stocks — sensitive to the cycle and to sentiment. Utilities and telecoms, whose demand holds regardless of the economy, carry low betas and wobble less when markets do.

The caution is that beta captures only one face of risk. It measures the portion of movement shared with the market and says nothing about company-specific dangers such as an accounting scandal.

Beta is also computed from past data and guarantees nothing ahead. It shifts as a business changes shape or takes on debt. Use it as a reference, but never judge risk from a single number. In practice the portfolio-level beta is more useful. Filling a portfolio with high-beta names means the drawdown is that much deeper when the market falls.