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Portfolio Beta Template

Download our free portfolio beta template

Portfolio Beta Template

This portfolio beta template will help you calculate the weighted average beta of all of the stocks in your investment portfolio. Beta (β), as a measure of volatility relative to the market, is an important financial metric to consider to evaluate how an investor’s portfolio responds to the market.

Here is a quick preview of CFI’s portfolio beta template:

 

Portfolio Beta Calculator

 

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Portfolio Beta Calculator

Download the free Excel template now to advance your finance knowledge!

Beta and Financial Markets

Beta (β) is a measure of the volatility of returns with regards to the performance of the market. By observing beta, financial analysts try to link the performance of a stock to how well the stock market is doing. To further elaborate, a company with a higher beta is assumed to have a higher risk and higher returns.

The value of beta can be interpreted as follows:

  • β > 1: more volatile compared to the market
  • β = 1: exactly as volatile as the market
  • 0 < β < 1: less volatile compared to the market
  • β = 0: completely uncorrelated with the market
  • β < 0: negatively correlated with the market

For example, we can look at a high-risk technology firm which has a beta of 2. This is a firm that is more volatile than the market and will on average return significantly more than the market return is in a given period.

Additionally, Beta is an integral part of the Capital Asset Pricing Model (CAPM). The CAPM is used to calculate the expected return on a security. The formula for the CAPM is as follows:

 

CAPM Formula

 

Where:

Ra = Expected return of the security
Rrf = Risk-free rate
Ba = Beta (β) of the asset
Rm = Expected return of the market

You can see that beta is a multiplier to the market risk premium (Rm – Rrf) in this formula. Therefore, by examining the CAPM, we can deduce how a higher beta would result in higher returns if the market was performing well. However, we can also see how a high beta would result in lower or even negative returns if the market was performing poorly.

Use CFI’s portfolio beta template to calculate the beta of your entire portfolio!

 

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