Beta

What it shows

Beta is the slope of a line fitted to the stock's daily returns plotted against the index's daily returns. A beta of 1.5 means that, on average, when the index moved 1% the stock moved 1.5% in the same direction.

It is a description of the past year, and it changes over time.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

1. Take daily returns of the stock and the index.
2. Fit a line: stock return = alpha + beta × index return.
3. Beta is the slope.
4. Plot a rolling 252-bar beta.

Starting values: Window 252 bars; Index S&P 500. These are proposed and will be tuned on real price data before launch.

How to read it

• The panel shows beta over time.
• The dashed line is 1.
• Above 1 means bigger moves than the index.

Status labels you may see

Limits

• Backward-looking.
• Depends on the index and window.
• Low fit makes beta unreliable.

Try it in forecastviz

• Open any ticker and choose Relative strength, cycles and structure → Beta in the left menu.
• Switch between 1Y, 3Y to see how the picture changes.
• Compare with Correlation with the index and Relative strength ratio on the same chart.

Questions

Related trends

Further reading

• O'Neil, How to Make Money in Stocks
• Levy, The Relative Strength Concept of Common Stock Forecasting
• Pring, Technical Analysis Explained
• Frost and Prechter, Elliott Wave Principle
• Hank Pruden, The Three Skills of Top Trading
• Hirsch, Stock Trader's Almanac