Beta measures how sensitive an asset’s return is to movements in the overall market.

Interpretation:

  • beta = 1: moves roughly with the market
  • beta > 1: more sensitive than the market
  • 0 < beta < 1: less sensitive than the market
  • beta < 0: tends to move opposite the market

Beta is a measure of systematic risk, not total risk. That is why it belongs in Risk and Return rather than standing alone as a complete risk measure.