Beta is a measure of a stock's volatility in relation to the overall market. A stock with a beta of 1 is expected to move in line with the market, while a stock with a beta of less than 1 is expected to be less volatile than the market, and a stock with a beta of more than 1 is expected to be more volatile than the market.
Beta can be a useful tool for investors who are trying to assess the risk of a particular stock or portfolio. For example, a stock with a high beta may be more risky, as it is more sensitive to market movements. On the other hand, a stock with a low beta may be less risky, as it is less sensitive to market movements.
It is important to note that beta is not a perfect measure of risk, as it only measures the historical volatility of a stock or portfolio and does not take into account other factors that may affect risk, such as the financial health of the company or the overall market conditions.
Overall, beta is a useful tool for investors who are trying to understand the risk profile of a particular stock or portfolio. By considering beta, along with other factors such as the financial health of the company and overall market conditions, investors can make more informed decisions about the risk and potential return of their investments.
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