This is a measure of the volatility of a portfolio, or a single stock, in relation to the wider market.

The higher a stock’s beta the more volatile, or cyclical, it tends to be. In simple terms it compares the movement in a single stock to the movement of the wider market – if a stock moves say 20% when the stock market moves 10%, it has a beta of 2 (20%/10%). In short then, a stock with a beta of 2 usually moves, based on historic data, twice the distance of the wider stock market whereas a stock with a beta of say 1 moves exactly in step with it. Defensive portfolios or stocks tend not to swing around wildly and therefore have lower betas below 1.