Beta vs benchmark
Beta
What it is
Measure of the stock's sensitivity to benchmark market moves (SPY for US, XIC for Canada). A beta of 1 means the stock moves on average as much as the index; 1.5 = 50% more volatile; 0.7 = 30% less volatile. Computed over 2 years of daily log-returns.
How to read it
A beta > 1 amplifies market moves — useful in bull markets, dangerous in corrections. A beta < 1 partially protects in downturns at the cost of reduced upside participation. A negative beta (rare) signals inverse movement — typically the VIX or certain hedges.
Common reference points
- Defensive — less volatile than index< 0.7
- Index-aligned0.7 – 1.2
- More volatile than index1.2 – 1.7
- Highly volatile — strong amplification> 1.7
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
Historical beta doesn't predict future beta. It varies with the time window chosen (1 year vs 5 years). It says NOTHING about move direction — only amplitude. A stock with beta 1.5 can underperform the market.
Other measures — Performance
Educational content. Polaris is not a registered investment adviser and makes no recommendation.