Glossary / Relative performance

Beta

Beta measures how much a security's price has historically moved for a given move in its benchmark. A beta of one describes a security that has moved roughly in line with the benchmark; above one describes larger swings in both directions, below one describes smaller ones.

How it is measured

How is beta measured?

Regress the security's periodic returns against the benchmark's over a sample window. The slope of that regression is beta. The window length and the return interval — daily, weekly, monthly — both change the estimate, which is why published betas for the same security differ between data providers.

Why it matters

Why does beta matter to a swing trader?

Beta is the standard adjustment for comparing securities that move at different amplitudes: without it, a security that swings twice as hard as the market will look remarkable in any up period and alarming in any down one, purely because of its amplitude. The caution is that beta is an estimate from a past sample, not a fixed property — it drifts as a company's business, leverage and shareholder base change.

Related

See this in the product

How Tapeline compares against a benchmark · Full methodology

Related terms

Alpha
Alpha is the part of a return that is not explained by the benchmark's move over the same period — the difference between what a holding did and what its benchmark did while it was held.
Relative strength
Relative strength is a difference, not a standalone reading: a security's price change over a period, minus a benchmark's price change over exactly the same period.
Volatility
Volatility measures how much a security's price varies around its own average over a period.
Drawdown
Drawdown is the decline from a peak value to the lowest point reached before a new peak, expressed as a share of that peak.

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General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.