How this number is made
Beta is correlation times the asset’s volatility, divided by the market’s volatility. It says how much the asset tends to move when the market moves one percent. The correlation and both volatilities have to come from the same history. A beta is a description of that history, not a speed limit.
- Correlation of 1 means the asset moved with the market. Zero means it did not.
- If the market volatility is from a different window than the asset, the beta is junk.
Formula
Beta = correlation × asset volatility ÷ market volatility.
Worked example
With the figures already in the form, beta is 1.05.
Questions
Why not regress the prices here?
A regression needs the series. This page is the closed form once you already have the correlation and the two volatilities.
Can beta be negative?
Yes, if the correlation is negative. The asset tended to rise when the market fell.