Let's turn to how a stock behaves or how much it moves when markets move.

That's where beta or beta comes in.

Beta measures how sensitive a stock's returns are to movements in the overall market.

It expresses how volatile the stock is relative to that broader market and how closely it tends to move with it.

A beta of one means the stock usually moves in the same direction and by roughly the same percentage as the market moves.

A beta above one means the company's stock price tends to move more than the market.

For example, if the market rises by 1%, a stock with a beta of 1.5 might rise about 1.5%, but also fall by 1.5% when the market drops by just 1%.

A beta below one means the stock is less sensitive to market moves.

It fluctuates less than the market overall, and a negative beta means it often moves in the opposite direction.

This is rare, but is sometimes seen in sectors like gold mining or insurance.

So in simple terms, beta tells you two things about how a stock behaves direction.

Does it tend to move with or against the markets and magnitude By how much on average does it move? Companies with steady, predictable earnings such as utilities or consumer staples firms, they usually have low beaters because their profits don't change much when the economy does.

Meanwhile, cyclical industries like autos, airlines, or luxury goods, they tend to have higher beaters since their earnings swing more when economic conditions change.

But where does beta come from? We can calculate the beta by running a linear regression.

Comparing the stock's returns with the market's returns over time.

However, it's important to note that the result depends on how you measure it, which market index you choose, how frequently you start pull returns daily, weekly, or monthly, and how long your lookback period is.

Are you just using data from the last two years, five years, or 20 years? There's no single right answer.

The goal is to capture how the company behaves today, not how It it behaved years ago under a a different structure or different strategy.

Finally, remember that beta isn't fixed.

It evolves over time as a company's business mix, leverage or market environment changes.