Relative Risk Measure & Beta

Beta: Represents the slope of the regression line. Beta measures a fund’s risk relative to the market as a whole (i.e. the “market” can be any index or investment). Beta describes the fund’s sensitivity to broad market movements. For example, for equities, the stock market is the independent variable and has a beta of 1. A fund with a beta of 0.5 will participate in broad market moves, but only half as much as the market overall.

Beta Risk

Investors who are required to select and monitor investment managers should develop a basic understanding of investment statistics. Quantitative tools can provide you with good insight that you can use in your qualitative interviews with managers and when monitoring your investments.