GlossaryAdvanced
Portfolio Beta
A weighted-average measure of how sensitive a portfolio's returns are to broader market movements, relative to the market itself.
Beta measures how sensitive an individual asset's returns have historically been to movements in a broader reference market — a beta of 1 means the asset has historically moved in line with that market, above 1 means historically more volatile, and below 1 means historically less volatile.
Portfolio beta is the weighted average of each individual holding's own beta, weighted by its share of the total portfolio, giving a single estimate of how sensitive the overall portfolio is to broader market movements. See Kaavon's Portfolio Beta calculator for the full calculation.
Examples
- A portfolio beta above 1 suggests the overall portfolio has historically been more volatile than its reference market, not less.
- Portfolio beta is a weighted average, so a single large, high-beta holding can dominate the overall portfolio beta even if most other positions have low betas.