How can Beta be calculated? Well in the table, we've got some Betas for food companies. And we're going to focus on Kelloggs The Beta looks at the return given by the market and the returns given by our company So here we have a graph and on the vertical axis I've got returns from Kellogg ranging from positive 10% to negative 15% On the horizontal, I've got the returns for the market, for positive 12 to negative 8 We've then plotted some points and tried to draw a line of best fit between them. This is the correlation between those points What we can see is if the market return is 7% That seems to give a Kellogg return of about 4%. If the market return is negative 3, that seems to give a Kellogg return of 2% or just below 2% We use this relationship to come up with the Beta. If we see the market going up, we can try to predict how much Kellogg will go up And if the market goes down, try to predict how much Kellogg will go down The slope of that line, gives you the Beta In this case, it's 0.5537