How to calculate the beta of a portfolio

Written by laura lemay
  • Share
  • Tweet
  • Share
  • Pin
  • Email
How to calculate the beta of a portfolio
If your portfolio contains international equities, portfolio beta measurement may require recalculation. (newspapers image by Christopher Hall from

A stock's beta theoretically measures price sensitivity compared with the market. Investors with multiple positions should consider their portfolio's beta. Sophisticated investors may want to take a closer look at beta measurement.

Calculation of beta requires a time horizon as well as measurement against a market standard, such as the S&P 500. International equities, a short- or long-term horizon and other factors affect beta. You should learn how to calculate your portfolio's beta for the greatest accuracy.

Skill level:

Other People Are Reading

Things you need

  • Spreadsheet software, such as Excel

Show MoreHide


  1. 1

    Calculate the beta of your portfolio to position your holdings for moves with the market, according to "Modern Portfolio Theory and Investment Analysis" (2009).

    The concept of investment timing requires the adjustment of portfolio beta prior to market moves. For example, when an investment manager believes the market is about to rise, she may adjust the portfolio's beta higher to create additional upward price sensitivity for portfolio holdings. Use beta to calculate price sensitivity in equity and equity and debt portfolios.

    How to calculate the beta of a portfolio
    Calculate portfolio beta to better understand the importance of diversification in risk management. (Stock Market image by Paul Heasman from
  2. 2

    Compute beta using a simple calculation when your portfolio contains securities from one marketplace, such as the S&P 500. According to the authors of "Financial Management" (2007), "Beta is established from past information on the assumption that it will remain fairly stable over time." In the authors' example, portfolio beta is the weighted average of the individual betas of securities in the portfolio.

    How to calculate the beta of a portfolio
    Adjusting your portfolio's beta may facilitate faster or slower moves when compared with the market. (stock graph drawing image by .shock from
  3. 3

    Use Excel or spreadsheet software to calculate and recalculate portfolio beta according to market, marketplace conditions and other factors. Know how to create a spreadsheet that will capture information at a glance, and automatically update your portfolio's beta.

    Beta is seldom a static number, so the dynamic relationship of your portfolio's beta to the overall market, while best reflecting your investments, may help you best manage your money.

    How to calculate the beta of a portfolio
    Use spreadsheet software to calculate and update your portfolio beta. (number background image by kuhar from
  4. 4

    Calculate the beta of your investments when evaluating the risk-to-reward potential of your portfolio. For example, when your portfolio contains overweighted positions of any security, your calculation should reflect the overweighting. A security assuming 40 per cent of portfolio value is not the same as one assuming 10 per cent.

    In this example, 10 per cent of the portfolio is invested in a lower-than-market beta stock (0.8, where the market is 1.0); 20 per cent is invested in a higher than market beta stock (1.4); 30 per cent is invested in a higher than market beta stock (1.8); and 40 per cent is invested in a higher than market beta stock (1.9). The calculation, (0.10)(0.8) + (0.20)(1.4) + (0.30)(1.8) + (0.40)(1.9) = 1.67, shows the portfolio beta is high relative to the market.

    The portfolio's owner believes the market is going to rise. However, overall portfolio risk would be better managed with greater position diversification.

    How to calculate the beta of a portfolio
    Adjust beta to the weighted position of each security in your portfolio. (Girl on her workplace working image by Angel_a from
  5. 5

    Understand that derivatives, structured products and options have beta coefficients relative to the market. When calculating your portfolio beta, include these securities for an accurate picture. While calculations are complex, knowing how much risk your portfolio bears is essential to sound money management.

Tips and warnings

  • Use many resources to learn more about portfolio management.
  • Beta coefficients may not accurately describe the risk associated with any security.
  • This is not an offer to buy or sell securities and does not constitute investment advice.

Don't Miss

  • All types
  • Articles
  • Slideshows
  • Videos
  • Most relevant
  • Most popular
  • Most recent

No articles available

No slideshows available

No videos available

By using the site, you consent to the use of cookies. For more information, please see our Cookie policy.