Beta

Beta measures a share's sensitivity to the market as a whole, measured over past returns. A beta of 1.15 means that historically, when the market moved 10%, this stock moved about 11.5% in the same direction.

It is a measure of co-movement, not of danger. A gold miner with a low beta can be a wildly volatile holding; its swings simply have not lined up with the index.

A stock with a beta of 1.15, in a market that falls 20%.

1. 11.15 x -20% = -23%.

Every example in this glossary describes the same imaginary company, so the figures join up as you move between metrics.

• Use it for how a holding behaves inside a portfolio, not for how risky the business is.
• It is measured over a window, and the window matters. A beta from a calm year underestimates what a turbulent one will do.
• A portfolio's beta is roughly the value-weighted average of its holdings', which is what makes it useful at that level.

• It is entirely backward-looking, and a company that has changed — through an acquisition, a disposal or a shift in leverage — carries a beta describing a business that no longer exists.
• It treats upside and downside movement identically, though almost no investor does.
• It says nothing about company-specific risk, which is most of what can go wrong with a single holding.

Measured against the benchmark from real price history rather than taken from a data provider, and used in two places. It carries 25% of the scorecard's Risk category, and it drives the portfolio stress scenarios, where each holding's shock is its beta applied to the market fall within a documented clamp — so a low-beta portfolio loses roughly 8% in a scenario where a high-beta one loses over 30%.

The full methodology covers where the figures come from, how the statements are normalised, and what is deliberately left unadjusted.