Beta

Beta Explained

How much your portfolio moves relative to the market

Formula

Cov(Rp, Rm) / Var(Rm)

where Rp is portfolio return, Rm is market (benchmark) return, Cov is covariance, and Var is variance.

What is the Beta?

Beta measures the sensitivity of your portfolio to market movements. A Beta of 1.0 means your portfolio moves in lockstep with the benchmark. Above 1.0 means you amplify market moves — bigger gains in bull markets, bigger losses in bear markets. Below 1.0 means you're less exposed to market swings. Beta is a cornerstone of the Capital Asset Pricing Model (CAPM) and is central to understanding systematic risk.

How to interpret it

Beta tells you about systematic (market) risk, not total risk. A low-beta portfolio is not necessarily a low-risk portfolio — it could have high idiosyncratic risk from concentration. Beta is benchmark-dependent: the same portfolio will have a different Beta against the S&P 500 vs the FTSE All-World. Always check which benchmark is being used.

What counts as a good Beta?

< 0Inverse correlation with the market — typical of hedged positions or gold

0 – 0.5Defensive — moves little with the market; typical of bonds or utilities

0.5 – 1.0Moderate — less volatile than the market overall

1.0Market-neutral — tracks benchmark closely

> 1.0Aggressive — amplifies market moves; higher risk/reward profile

What affects your Beta?

Sector allocation — tech tends to be high-beta; utilities low-beta
Geographic diversification — international assets may have lower beta to a UK or US benchmark
Market cap — small caps typically have higher beta than large caps
Leverage — borrowed capital increases beta directly
Benchmark choice — Beta is only meaningful relative to its benchmark

How Portivex uses Beta

Portivex calculates Beta using your portfolio's daily returns against your selected benchmark (default: S&P 500). You can switch the benchmark in the metrics view to see how Beta changes across different reference points. Your investor profile sets the 'expected' Beta range — a Conservative profile flags a Beta above 0.8 as elevated, while Growth profiles expect Beta closer to 1.0.

See my Beta →

Frequently asked questions

Is a lower Beta always better?

Not necessarily. A lower Beta means less market exposure, but also less potential upside in bull markets. What matters is whether your Beta matches your risk tolerance and investment horizon. A 25-year-old accumulating wealth may want higher Beta than someone approaching retirement.

Can Beta be negative?

Yes. Assets like gold, certain bonds, or short positions can have negative Beta — they tend to rise when the market falls. A small allocation to negative-Beta assets can reduce overall portfolio Beta and act as a hedge.

Why does my Beta change when I switch benchmarks?

Beta is a relative measure — it only means something in relation to a specific benchmark. A UK equity portfolio will have a Beta close to 1.0 against the FTSE 100 but potentially much higher or lower against the S&P 500, depending on how correlated UK and US markets have been during your holding period.

Related metrics

See your Beta in real time.

Add your holdings and Portivex calculates your Beta — with confidence context and plain-English interpretation tailored to your investor profile.

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