Where to Find it

• The stock beta number can often be found in the fundamental analysis section of a stock's metrics. Looking at Yahoo! Finance, for example, the beta is found by clicking on the Key Statistics heading found on the right side of the stock's screen. The beta is at the top of the right column. Along with the beta, the investor can see the stock's percentage of movement compared to the S&P 500. This is simply another way to display beta.
  
  

What Does it Mean?

• Beta is simply a stock's movement as it relates to a broader index. Very few stocks have no trading activity in a given trading day. Each purchase or sale of shares of a stock cause the price to go up or down. The amount of trades or the size of a trade can cause a stock to rise or fall in value by small amounts or very large amounts. Also, the number of shares issued by a company can change its reaction to buying and selling.
  
  

Interpreting Beta

• Beta is the number that measures the severity of a stock's upward and downward movement and is simply a comparison. That particular stock's amount of movement is compared to the movement of an index. The broader index is the S&P 500 unless stated otherwise. The S&P 500 has an implied beta of 1. If the stock has a beta higher than 1, a trader can expect it to have more volatility than the S&P 500. The higher the number, the more volatility. A number less than 1, the stock will not react as much as the broader index.
  
  

Low Beta Stocks

• Investors use low beta stocks as defensive investments. If the stock market is in a bear trend, many investors purchase low beta stocks as a way to protect their money. Because low beta stocks often have dividends attached to them, investors are happy to protect their money while earning the dividend.
  
  

High Beta Stocks

• High beta stocks are a favorite of day traders as well as people who feel that the stock market is recovering from a recent decline. Because high beta stocks will often drop in value at a more severe rate than the broader index, they will also rise in value much more rapidly when a recovery is in place. Day traders like high beta stocks because their price swings are more violent in a trading day.