1. What Is Portfolio Beta?

Portfolio Beta measures the systematic risk of an investment portfolio relative to the overall market. It indicates how much the portfolio's value is expected to move in response to market fluctuations.

2. How Does The Calculator Work?

The calculator uses the portfolio beta formula:

Where:

• \( Weight_i \) — The percentage weight of asset i in the portfolio (%)
• \( Beta_i \) — The beta coefficient of asset i (dimensionless)

Explanation: The formula calculates the weighted average of individual asset betas, providing the overall portfolio's sensitivity to market movements.

3. Importance Of Portfolio Beta Calculation

Details: Portfolio beta is essential for risk management, portfolio diversification, and understanding how a portfolio might perform during different market conditions.

4. Using The Calculator

Tips: Enter the weight percentage and beta coefficient for each asset in your portfolio. Ensure weights sum to 100% for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What does a beta of 1 mean?
A: A beta of 1 indicates that the portfolio's price will move with the market. A beta greater than 1 means higher volatility than the market, while less than 1 means lower volatility.

Q2: Can portfolio beta be negative?
A: Yes, a negative beta indicates that the portfolio tends to move in the opposite direction of the market.

Q3: How many assets can I include in the calculation?
A: This calculator supports up to 3 assets. For more complex portfolios, the same formula can be extended to include additional assets.

Q4: What are the limitations of using beta?
A: Beta assumes past price movements will predict future risk and doesn't account for new market conditions or fundamental changes in companies.

Q5: How often should I recalculate my portfolio beta?
A: Portfolio beta should be recalculated whenever you make significant changes to your portfolio allocation or when individual asset betas change substantially.