Introducing Beta

beta tutorial

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We are pleased to announce a new feature at clearnifty: Beta.

Beta of a stock is defined as sensitivity of a stock with respect to market or index. At clearnifty, beta of a stock is calculated with respect to NIFTY. For example, beta of DLF is 1.4; which means 1% rise or fall in nifty would result in 1.4% rise or fall in DLF on average. At clearnifty, you can view beta above technical indicators section of a stock page.

Beta indicates the stock's correlation with the market index and cautions on the risk associated with it. Stocks with beta more than 1 will outperform markets (on average) if market goes up but at the same time they have huge potential for losses if market goes down. Investors with less risk appetite should stick with low-beta stocks.

Since beta calculation is a statistical process, we associate a confidence with beta which tells us about the relevance of beta of calculated. According to the statistical processes involved, beta with a confidence of 20% or more can be trusted. Major news, earnings, policy changes, etc., all may cause a reaction that dramatically alters the stock's performance which can't be interpreted from beta.

Beta of a portfolio can be calculated by taking the weighted multiple of betas of constituent stocks in portfolio. Beta can be negative.

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Clearnifty Team.

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