Beta
How much does an asset tend to move when a chosen benchmark moves, and what does that ratio reveal about its risk?
In plain words
Beta measures how much one asset's returns tend to move when a benchmark's returns move. A beta of one means it moves with the benchmark on average; above one means larger moves, below one means smaller moves.
Why it matters
Beta separates the risk of an asset from the risk of the whole market. An asset can fall while its benchmark rises, and the size of that gap tells a holder how much of the move comes from the benchmark and how much from the asset itself.
In a real week: BTC, week of 14 July 2025
In the week of 14 July 2025, BTC returned -1.53% while ETH beat BTC by 27.93 percentage points, with their hourly returns correlating at 0.62. The spread shows the two assets moving together only loosely that week; a beta is estimated over many periods, and one week alone does not establish it.
A common mistake
Treating a high beta as a forecast of a particular direction. Beta describes the size of co-movement over a measured period, and it can change when the relationship between the asset and its benchmark shifts.