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BETA volatility measure to compare FTSE100 stocks
Hello there, I am dexter and I am new to the forum.
I calculated BETA for all FTSE100 stock using FTSE100 as benchmark index. In all cases Beta < 1
Shouldn't beta be > 1 for some of the stocks in order to have a benchmark index that is the average of the various stocks?
Am I missing something?
Can someone please explain why I haven't found any stock with beta > 1?
Thank you a lot!!
Either I am missing something or there is an incorrect calculation somewhere. Are you getting any numbers below 0?
Just a thought....if all of your calculations arrive at values between -1 and 1 then you are using the wrong formula. Those values would be for "correlation" which gives you a value that indicates that the stock either tends to move in the same direction as the index, opposite the index or independent of the index. Beta, as I understand it, measures the correlation as well as the magnitude of the movement. That formula is more complex and will give you numbers like 2.5, -1.1, 3, etc. but can be used to measure your Delta risk as compared to the index.
For example....currently my portfolio has a Delta of 35 when Beta weighted against the SPY. Which, if the positions had a high correlation to the SPY, I could then expect my portfolio to move somewhere in the neighborhood of 35$ for every dollar of movement in the SPY. However since most of my positions have a very low correlation to the SPY I can expect my Delta risk against the SPY to be, to a certain extent, independent of the SPY.
