How to use Standard Deviation and Beta to determine a stocks volatility?
July 24th, 2010 | 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.
Bessie
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.
Bessie
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By jeff410 on Jul 25, 2010 | 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.