Beta
How much a stock's price moves relative to the overall market — high beta means amplified market moves.
Definition
Beta is the slope of the regression line between a stock's returns and the market's returns. A beta of 1.0 means the stock moves one-for-one with the market — when the S&P 500 rises 1%, the stock tends to rise 1%. A beta of 1.5 amplifies market moves; a beta of 0.5 dampens them.
Beta originated in the Capital Asset Pricing Model (Sharpe, 1964; Lintner, 1965) as the measure of systematic risk — the part of a stock's risk that can't be diversified away. CAPM predicted that high-beta stocks should earn higher returns. Empirically, the prediction has not held up well: high-beta stocks have generally not delivered on the promised excess return, which is part of why the low-volatility anomaly exists.
Beta is backward-looking, computed from historical price data (typically 3–5 years of monthly or weekly returns). That makes it noisy at regime turns — a tech megacap's beta during 2010–2019 says little about its beta during a 2022 rate-hiking cycle.
Formula
β = Cov(stock returns, market returns) ÷ Var(market returns)How QScoring uses it
Beta is one of two inputs to the QScoring risk category. Stocks with a beta closer to 1.0 score higher; very high or very low betas score lower. The data provider computes beta against ~5 years of price history. See the risk section.