Beta

What this video covers

• Why beta measures systematic risk only and completely ignores company-specific (unsystematic) risk
• Why the Standard and Poor's 500 (S&P 500) benchmark always has a beta of exactly 1.0, and how every other security is measured against that baseline
• How to interpret beta greater than 1.0 (aggressive), less than 1.0 (defensive), 0 (no correlation, like Treasury bills), and negative beta
• Why a beta of 1.5 amplifies losses just as aggressively as it amplifies gains, the classic double-edged-sword exam trap
• How to calculate portfolio beta as a weighted average of each holding's beta, and why a simple average will cost you the question
• The head-to-head distinction between beta (systematic risk only) and standard deviation (total risk, systematic plus unsystematic)
• Why standard deviation is the better risk metric for a concentrated, undiversified portfolio while beta fits a well-diversified one