How to use Standard Deviation and Beta to determine a stocks volatility?
February 27th, 2008 | by admin |devindavis42 asked:
I understand how to get the standard deviation for a stock by going through the variance. What I’m curious about is how to convert the stocks standard deviation into the stocks beta value. Also what is considered a low volatile stock as far as standard deviation goes? I know with the beta anything higher than 1.0 is considered highly volatile. Any information on this subject would be greatly appreciated.
I understand how to get the standard deviation for a stock by going through the variance. What I’m curious about is how to convert the stocks standard deviation into the stocks beta value. Also what is considered a low volatile stock as far as standard deviation goes? I know with the beta anything higher than 1.0 is considered highly volatile. Any information on this subject would be greatly appreciated.
One Response to “How to use Standard Deviation and Beta to determine a stocks volatility?”
By jeff410 on Feb 29, 2008 | Reply
This is an excellent tutorial that someone else posted on how to calculate beta using Excel. A beta higher than one doesnt necessarily mean a stock is highly volatile. It just means the returns are more volatile than the market. Beta is the risk that is added to a diversified portfolio.