The beta calculation is essentially a comparison between the movements of an individual stock (or portfolio) and the movements of the market as a whole. The calculation begins by assigning a beta of 1 to a broad market index. If a stock has a beta of 2, then on average it swings twice as far as the market. If the market goes up 10 percent, the stock tends to rise 20 percent. If a stock has a beta of 0.5, it tends to go up or down 5 percent when the market rises or declines 10 percent. Professionals call high-beta stocks aggressive investments and label low-beta stocks as defensive.
The growth arc of the market is long and it bends up and to the right.
