Beta is a metric that compares a stock’s movements relative to the overall market, or a certain stock index. A high-beta stock tends to be more volatile than average, while a low-beta stock tends to be less volatile. While it’s true that high-beta stocks are typically riskier than the average stock, beta isn’t necessarily indicative of risk, as many people believe.
A stock’s beta compares its historical movements to the overall market, or a stock index — usually the S&P 500. And there are three possible categories a stock can be in, based on its beta.