S&P 500   4,455.48
DOW   34,798.00
QQQ   373.33
S&P 500   4,455.48
DOW   34,798.00
QQQ   373.33
S&P 500   4,455.48
DOW   34,798.00
QQQ   373.33
S&P 500   4,455.48
DOW   34,798.00
QQQ   373.33

High Beta Stocks

Beta is the result of a calculation that measures the relative volatility of a stock in correlation to a particular standard. For U.S. stocks that standard is usually, but not always, the S&P 500. Beta is a form of regression analysis and it can be useful for investors regardless of their risk tolerance. Beta is considered one of the few data points that can be beneficial for practitioners of fundamental analysis and technical analysis. This page lists stocks that have unusually high beta calculations. For example, a beta of 2.0 means a stock moves twice as much as the S&P 500. More about high beta stocks.

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CompanyCurrent PriceBetaPE RatioMarket CapVolumeAverage VolumeIndicator(s)
APA logo
APA
APA
$21.91
+1.7%
4.9412.31$8.28 billion9.07 million8.00 millionDividend Increase
Analyst Revision
MP Materials logo
MP
MP Materials
$34.15
+0.0%
4.93155.23$6.07 billion3.67 million4.11 millionGap Down
Overstock.com logo
OSTK
Overstock.com
$81.41
+3.6%
4.4110.77$3.50 billion1.69 million2.03 million
Rattler Midstream logo
RTLR
Rattler Midstream
$11.57
-0.7%
4.3213.77$1.72 billion161,948261,898Short Interest ↓
Canaan logo
CAN
Canaan
$6.11
-21.2%
4.2487.29$966.28 million28.34 million12.28 millionGap Down
High Trading Volume
OneWater Marine logo
ONEW
OneWater Marine
$39.05
0.0%
3.946.71$587.27 million29,66986,930
Creative Realities logo
CREX
Creative Realities
$1.35
0.0%
3.9312.27$16.06 million56,862623,300Gap Up
Western Midstream Partners logo
WES
Western Midstream Partners
$20.29
0.0%
3.939.39$8.38 billion1.07 million1.36 million
Altus Midstream logo
ALTM
Altus Midstream
$67.80
0.0%
3.8916.26$1.10 billion63,26452,581
Party City Holdco logo
PRTY
Party City Holdco
$7.98
+0.0%
3.895.36$893.07 million2.39 million2.79 millionNews Coverage
Gap Down
Sasol logo
SSL
Sasol
$16.52
0.0%
3.815.90$10.45 billion249,337641,458News Coverage
Rayonier Advanced Materials logo
RYAM
Rayonier Advanced Materials
$7.37
+0.3%
3.743.60$469.74 million221,949537,779Positive News
Commercial Vehicle Group logo
CVGI
Commercial Vehicle Group
$9.60
0.0%
3.6922.86$316.58 million205,501299,985News Coverage
Transocean logo
RIG
Transocean
$3.42
0.0%
3.6528.50$2.23 billion13.36 million23.92 millionNews Coverage
DCP Midstream logo
DCP
DCP Midstream
$26.90
0.0%
3.5834.94$5.60 billion436,695792,503Gap Up
SandRidge Energy logo
SD
SandRidge Energy
$11.57
+0.0%
3.381,158.16$423.34 million738,918539,382
Devon Energy logo
DVN
Devon Energy
$33.09
+0.0%
3.37183.84$22.40 billion10.33 million11.99 millionShort Interest ↑
Gap Down
Continental Resources logo
CLR
Continental Resources
$44.22
0.0%
3.3742.93$16.25 billion1.12 million2.10 million
Helix Energy Solutions Group logo
HLX
Helix Energy Solutions Group
$3.80
0.0%
3.3647.51$573.02 million1.23 million2.02 millionAnalyst Upgrade
News Coverage
Wheeler Real Estate Investment Trust logo
WHLR
Wheeler Real Estate Investment Trust
$3.07
0.0%
3.3410.26$29.82 million112,432385,199News Coverage
Positive News
Camping World logo
CWH
Camping World
$39.51
0.0%
3.337.17$3.46 billion675,8181.23 million
Summit Midstream Partners logo
SMLP
Summit Midstream Partners
$36.45
-0.1%
3.320.80$245.86 million24,29759,587News Coverage
ChampionX logo
CHX
ChampionX
$21.84
0.0%
3.30364.06$4.41 billion1.11 million1.36 million
Antero Midstream logo
AM
Antero Midstream
$10.24
0.0%
3.2914.22$4.89 billion2.42 million4.40 million
Core Laboratories logo
CLB
Core Laboratories
$27.19
+0.0%
3.2937.76$1.26 billion460,222501,054News Coverage
NN logo
NNBR
NN
$5.24
+0.0%
3.281.62$225.50 million76,453247,907
CBAT
CBAK Energy Technology
$2.55
0.0%
3.277.73$225.45 million1.17 million4.00 million
Adient logo
ADNT
Adient
$40.72
+0.0%
3.2534.80$3.84 billion690,502877,277
TETRA Technologies logo
TTI
TETRA Technologies
$3.08
3.205.22$389.94 million1.10 million2.19 million
Vermilion Energy logo
VET
Vermilion Energy
$8.56
+0.0%
3.182.11$1.39 billion2.43 million2.31 millionAnalyst Report
News Coverage
Gap Down
Century Casinos logo
CNTY
Century Casinos
$13.47
0.0%
3.1625.90$398.50 million68,481250,255
Resolute Forest Products logo
RFP
Resolute Forest Products
$11.96
+0.0%
3.142.70$946.13 million475,354791,471News Coverage
Gap Down
China Automotive Systems logo
CAAS
China Automotive Systems
$3.32
0.0%
3.1318.44$102.43 million16,438135,920News Coverage
Manning & Napier logo
MN
Manning & Napier
$9.17
+0.0%
3.1210.08$169.61 million24,87258,694Gap Up
Targa Resources logo
TRGP
Targa Resources
$47.42
0.0%
3.1059.28$10.84 billion832,7101.98 million
Wayfair logo
W
Wayfair
$274.59
0.0%
3.1085.81$28.53 billion960,1191.59 million
Herc logo
HRI
Herc
$159.98
+0.0%
3.0930.88$4.74 billion345,271228,186Dividend Announcement
Analyst Downgrade
Analyst Revision
Gap Down
Mesa Air Group logo
MESA
Mesa Air Group
$7.93
+0.0%
3.078.26$284.62 million278,465961,625
BRP logo
DOOO
BRP
$97.61
+0.0%
3.0012.01$7.87 billion68,82997,793
G-III Apparel Group logo
GIII
G-III Apparel Group
$29.93
+0.0%
3.0011.92$1.45 billion285,206449,948News Coverage
Delek Logistics Partners logo
DKL
Delek Logistics Partners
$45.24
0.0%
3.0011.23$1.97 billion16,40765,576News Coverage
Alto Ingredients logo
ALTO
Alto Ingredients
$4.66
-2.5%
2.9942.37$339.28 million1.21 million3.24 million
Everi logo
EVRI
Everi
$24.57
+2.5%
2.9943.11$2.21 billion804,1591.16 millionAnalyst Revision
CURO Group logo
CURO
CURO Group
$16.50
+1.5%
2.984.85$683.60 million85,951268,255News Coverage
Crescent Point Energy logo
CPG
Crescent Point Energy
$4.23
+0.0%
2.971.45$2.46 billion2.84 million4.31 millionPositive News
Gap Down
The Dixie Group logo
DXYN
The Dixie Group
$5.16
+0.0%
2.9643.00$79.66 million59,733141,482Gap Down
Boot Barn logo
BOOT
Boot Barn
$96.08
0.0%
2.9528.51$2.84 billion235,528465,802
Medallion Financial logo
MFIN
Medallion Financial
$7.90
0.0%
2.92197.55$197.99 million47,35245,008Short Interest ↓
Gap Up
Golden Entertainment logo
GDEN
Golden Entertainment
$49.93
+0.0%
2.9018.49$1.44 billion327,040196,643Gap Down
Big 5 Sporting Goods logo
BGFV
Big 5 Sporting Goods
$25.93
0.0%
2.905.35$581.35 million815,7481.35 million
eXp World logo
EXPI
eXp World
$49.73
-0.1%
2.89118.41$7.28 billion641,9681.58 millionInsider Selling
Gap Down
Mogo logo
MOGO
Mogo
$5.23
+0.0%
2.89261.63$367.82 million1.96 million2.20 millionAnalyst Report
Gap Down
Tupperware Brands logo
TUP
Tupperware Brands
$21.31
0.0%
2.878.26$1.06 billion570,693857,374News Coverage
Gap Up
GasLog Partners logo
GLOP
GasLog Partners
$4.23
+0.0%
2.843.85$209.78 million228,518771,244News Coverage
Gap Down
Halliburton logo
HAL
Halliburton
$21.00
+0.0%
2.84131.26$18.70 billion6.12 million9.47 millionInsider Selling
GrowGeneration logo
GRWG
GrowGeneration
$25.79
0.0%
2.8285.97$1.54 billion2.05 million2.04 millionShort Interest ↑
Gap Up
Brinker International logo
EAT
Brinker International
$51.63
0.0%
2.8018.44$2.37 billion1.15 million1.00 millionNews Coverage
Gap Up
Babcock & Wilcox Enterprises logo
BW
Babcock & Wilcox Enterprises
$6.03
0.0%
2.7710.40$517.50 million958,4701.07 millionGap Up
CONSOL Energy logo
CEIX
CONSOL Energy
$24.61
0.0%
2.7722.79$848.55 million302,154403,643
Realogy logo
RLGY
Realogy
$18.38
+0.0%
2.757.29$2.14 billion975,7811.47 million
Groupon logo
GRPN
Groupon
$24.13
+0.0%
2.7392.81$712.44 million873,6511.05 millionGap Down
Oasis Midstream Partners logo
OMP
Oasis Midstream Partners
$21.44
-1.9%
2.735.60$1.04 billion282,096257,394News Coverage
Ebix logo
EBIX
Ebix
$27.87
0.0%
2.7210.52$862.38 million141,642445,291
R. R. Donnelley & Sons logo
RRD
R. R. Donnelley & Sons
$4.38
-0.9%
2.702.01$318.86 million501,7021.31 million
Elevate Credit logo
ELVT
Elevate Credit
$3.60
+0.0%
2.705.37$120.96 million798,542376,814News Coverage
Positive News
Gap Down
High Trading Volume
Workhorse Group logo
WKHS
Workhorse Group
$7.52
0.0%
2.697.16$932.09 million5.95 million16.33 millionAnalyst Report
REV Group logo
REVG
REV Group
$17.16
0.0%
2.6933.65$1.11 billion302,891403,748
Navios Maritime Partners logo
NMM
Navios Maritime Partners
$29.78
+0.6%
2.682.43$590.24 million276,724482,973Analyst Downgrade
Pitney Bowes logo
PBI
Pitney Bowes
$7.43
-0.3%
2.6867.55$1.31 billion1.45 million2.96 millionOptions Volume
Constellium logo
CSTM
Constellium
$19.35
0.0%
2.6711.94$2.71 billion1.30 million1.10 millionNews Coverage
Alpha and Omega Semiconductor logo
AOSL
Alpha and Omega Semiconductor
$31.63
+0.0%
2.6614.92$833.55 million359,861281,542Analyst Report
News Coverage
Gap Down
SilverBow Resources logo
SBOW
SilverBow Resources
$22.22
+0.0%
2.6525.84$283.53 million143,688115,480Short Interest ↑
Alcoa logo
AA
Alcoa
$48.49
0.0%
2.6521.27$9.06 billion5.17 million7.26 millionAnalyst Report
Analyst Revision
News Coverage
Hovnanian Enterprises logo
HOV
Hovnanian Enterprises
$100.33
0.0%
2.641.19$627.56 million47,279119,215
Lands' End logo
LE
Lands' End
$25.50
+0.5%
2.6318.48$841.02 million214,253222,931Analyst Downgrade
Options Volume
Tronox logo
TROX
Tronox
$24.47
+0.0%
2.633.46$3.76 billion1.02 million1.69 million
The ONE Group Hospitality logo
STKS
The ONE Group Hospitality
$11.08
-1.1%
2.6248.18$353.08 million239,092219,688Analyst Revision
Magnolia Oil & Gas logo
MGY
Magnolia Oil & Gas
$16.62
0.0%
2.6215.68$3.92 billion5.71 million1.97 millionNews Coverage
High Trading Volume
Revolve Group logo
RVLV
Revolve Group
$68.84
+0.0%
2.6255.07$5.01 billion528,7921.11 millionGap Down
YETI logo
YETI
YETI
$95.97
0.0%
2.6242.28$8.39 billion1.17 million1.28 million
Signet Jewelers logo
SIG
Signet Jewelers
$80.97
-2.0%
2.628.12$4.30 billion381,567965,886
BGSF logo
BGSF
BGSF
$12.91
-0.7%
2.6215.01$133.53 million29,92458,129Short Interest ↓
The Pennant Group logo
PNTG
The Pennant Group
$30.15
0.0%
2.6075.38$855.11 million81,919112,076Gap Up
Silvergate Capital logo
SI
Silvergate Capital
$103.73
-1.3%
2.6047.37$2.75 billion514,4231.15 millionAnalyst Report
Analyst Revision
News Coverage
Gap Down
The New Home logo
NWHM
The New Home
$8.99
2.6032.11$163.27 million0126,133
Consumer Portfolio Services logo
CPSS
Consumer Portfolio Services
$5.77
-0.5%
2.586.20$132.39 million9,05725,231
Tenet Healthcare logo
THC
Tenet Healthcare
$71.39
-1.8%
2.5817.85$7.64 billion604,436951,656Analyst Report
Conn's logo
CONN
Conn's
$24.35
-0.7%
2.586.34$717.91 million179,858353,721
Red Rock Resorts logo
RRR
Red Rock Resorts
$50.72
+0.0%
2.5744.10$5.90 billion385,549811,210News Coverage
Select Interior Concepts logo
SIC
Select Interior Concepts
$14.41
0.0%
2.577.35$373.88 million71,836210,742News Coverage
Positive News
Resideo Technologies logo
REZI
Resideo Technologies
$25.42
0.0%
2.5714.44$3.67 billion510,749809,261Analyst Report
Alliance Data Systems logo
ADS
Alliance Data Systems
$102.38
+2.6%
2.567.18$5.09 billion781,882849,284News Coverage
Cerence logo
CRNC
Cerence
$103.40
-0.5%
2.5690.70$3.93 billion201,173552,450
Bally's logo
BALY
Bally's
$50.97
+2.8%
2.5626.41$2.27 billion655,494494,460Short Interest ↓
Analyst Revision
News Coverage
VAALCO Energy logo
EGY
VAALCO Energy
$2.58
0.0%
2.557.59$151.15 million109,642292,935
Penn National Gaming logo
PENN
Penn National Gaming
$75.72
+0.0%
2.5527.84$11.87 billion1.93 million4.76 million
Sonic Automotive logo
SAH
Sonic Automotive
$55.80
0.0%
2.558.56$2.33 billion294,596300,390
HBP
Huttig Building Products
$5.33
0.0%
2.534.89$146.04 million36,112143,971
Atkore logo
ATKR
Atkore
$97.10
+2.0%
2.5310.69$4.48 billion607,599480,011News Coverage
Altra Industrial Motion logo
AIMC
Altra Industrial Motion
$55.01
+0.0%
2.5324.02$3.57 billion233,024312,128Gap Down

Using High Beta Stocks to Maximize Your Investing Profits

What Does Beta Mean in Stock Selection?

fluctuating stock prices We often hear the word beta in the context of “beta test”. It’s a way of testing something (e.g. a software program) in a real-world situation to iron out any glitches before rolling it out to the public.

The word beta in the context of investment strategy means something different—or does it? 

Understanding beta can help investors understand why a company may be performing or underperforming, in addition to giving a measure of its risk, relative to Wall Street. In this way, beta can help investors predict how a stock is likely to perform before they buy the stock.

Beta is the result of a calculation that measures the relative volatility of a stock in correlation to a particular standard. For U.S. stocks, that standard is usually (but not always) the S&P 500. Beta can also be used by investors to evaluate a particular stock’s expected rate of return, particularly when using the Capital Asset Pricing Model (CAPM).

Beta is a form of regression analysis, and it can be useful for investors regardless of their risk tolerance. Beta is considered one of the few data points that can be beneficial for practitioners of fundamental analysis and technical analysis. Investors who tend to analyze stocks using fundamental analysis will use beta along with the price-to-earnings ratio, shareholders equity, debt-to-equity ratio, and other factors. Technical analysts will use beta as an indicator of stocks that offer the price movement they are seeking. They will use beta along with other indicators, such as average daily trading volume (ADTV) and a stock’s moving average.

What are the key terms related to beta?

Although investors will typically not have to calculate beta for themselves, it’s helpful to understand the meaning of two variables that are used in the formula for beta. These variables are covariance and variance.

  • Covariance is a measurement of how two stocks move together. If the number is positive, it means the price movement is generally correlated (i.e. when one stock goes up, so does the other and vice versa). If the number is negative, it means the price movement is generally not correlated (i.e. when one stock goes up, the other goes down and vice versa).

  • Variance measures how far a stock moves in relation to its mean. In the case of beta, the mean is the benchmark being used.

Beta is found by dividing covariance by variance. 

Covariance helps measure how closely individual stocks move relative to the overall market or index. If the direction of their momentum, the beta will be positive. If their momentum is oppositional, the beta will be negative.

Variance is a measure of the momentum of the stock market, relative to its mean. 

A financial advisor—or any investor, really—can leverage the beta calculation to measure individual stocks in terms of risk, relative to the stock market, or even a more specific index or fund, such as the securities in exchange-traded funds or a portfolio of stocks. 

An investment advisor (or formula-savvy retail investor) can then leverage the beta calculation again to build a capital asset pricing model. This more complex formula provides mathematically-backed investment advice about the risk of individual stocks relative to their expected rate of return. Investors can then build an investment strategy to reduce risk and acquire an asset that will outperform the market—minimizing losses and increasing gains. This, of course, is the universal strategy for finance across the board, whether you’re a registered investment advisor or a retail investor. 

Individual investors who are active traders will also want to make sure they do their own beta calculation to assess risk and build a CAPM to assess potential gains. Though it’s not the only stat they need to formulate a strategy, it’s as important as any of the other ones, such as market capitalization and price. 

In many cases, a financial website will give what’s known as the “provided beta” for a particular stock. For active traders, financial software programs will also provide the beta value. When using a provided beta, investors should pay attention to two variables.

First, it’s important to understand what benchmark is being used to determine beta. Since the beta shows a correlation between a particular security and something, an investor needs to know what that something is. As pointed out above, for U.S. stocks it is common for beta to be expressed as a correlation to a stock index, usually the S&P 500, but not always. In some cases, the Dow Jones Industrial Average (DJIA) may be used, or even the NASDAQ.

The second thing an investor will need to know about a stock’s beta is the time frame that is being measured. If you’re a long-term investor, you may want to know the beta over several years. If you’re an active trader, you’ll probably be more interested in the beta over a much more recent timeframe.

A personally calculated beta, on the other hand, is one that investors will calculate for themselves. To calculate beta, investors will have to know the covariance between the return of the stock being analyzed and the return of the benchmark for that stock as well as the variance of the market returns.

As we mentioned above, many financial software programs will do the calculation for you. It is also possible to use an Excel spreadsheet to calculate beta. For many investors, particularly those who are engaging in day trading, a personally calculated beta may be more accurate for their needs.

Beta can get confusing if an investor gets hung up on positive and negative. When an investor sees a negative number, they instinctively think a stock is falling (i.e. generating a negative return). That is not necessarily the case with a negative beta. Here’s why:

Beta is a correlation between the price movement of a security and a benchmark related to that security. For these examples, let’s assume an investor is buying a U.S. stock that is being benchmarked to the S&P 500.

The beta of the S&P 500 is 1. The simplest explanation for this is that in establishing a benchmark, you’re dividing one thing by itself and that will always equal 1. Therefore, knowing the beta of the S&P 500 is 1, investors can interpret the beta of a particular stock in the following ways:

Beta of 1: This means a stock is highly correlated to the S&P 500. This means that if the S&P 500 index is up for the day, the stock is more than likely going to be up for the day and vice versa. A beta of 1 also means that price movement will probably be very similar. In other words, if you were to overlay the stock’s price movement over the S&P 500, the two lines would look very similar.

Beta of less than 1: This means a stock is not very correlated with the market. Sometimes it will follow the trend in the market, but sometimes it won’t. In terms of price movement, a beta of less than 1 indicates that the stock is less volatile (i.e. less reactive to price movements in the broader market).

Beta of more than 1: This also means a stock is not very correlated to the market. However, unlike a beta of less than 1, this means a stock is more volatile (i.e. more reactive to price movements in the broader market).

Beta of less than 0 (i.e. a negative beta): This means a stock is inversely correlated to the market. The tendency of the stock is to move in the opposite direction as the market. The higher the negative number, the more volatile the stock.

As you can see, beta is all about its relationship to the number 1. The closer the number is to 1, the more it is correlated to the market, the further it is from 1, the less it is correlated. 

It’s important to understand that beta is a multiplicative factor. A beta of 1.3 means that a stock is 30% more volatile than the market. First and foremost, beta is about projecting risk, not return.

Let’s go through some examples.

  • Microsoft has a beta of around 1.25. This means an investor can reasonably expect that this stock is 25% more volatile than the market. This would be somewhat expected of a stock like Microsoft in the technology sector.
  • Walt Disney Company has a beta right around 1.03. This puts its volatility right in line with the broader market. This is what you might expect from a blue-chip stock.
  • In contrast, Duke Energy has a beta of around 0.27. This means it is not a very volatile stock, which is what investors would expect from a utility stock. This doesn’t mean that the stock is underperforming.

A beta can also be much higher than 1. There are some stocks that have a beta of 2 or more.

One of the most important things to keep in mind is that beta is not an indication of price performance, but rather of potential volatility. A positive beta does not mean that a stock is going up in price. In fact, a stock that has a positive beta while the market is falling is more than likely falling at a higher percentage rate than the market. 

Likewise, a negative beta does not mean that a stock is going down in price. When the market is trending lower, these stocks will tend to be rising. A negative beta also does not mean that a company is underperforming. It simply could be in a sector that naturally works in opposition to the broader market. Stocks of gold mining companies and gold ETFs are good examples. You should expect these stocks to have a negative beta compared to the market because gold (and many other precious metals) tend to rise when the market falls and vice versa.

How to Use Beta for Diversification

How can knowing the beta help investors create a more diversified portfolio? For starters, diversification is not just about investing in different asset classes. It's about investing in different types of assets within those classes. This is where beta can be a very useful measurement.

Many investors think they are diversified when they’re actually not. For example, you can look at two blue-chip stocks. In our example above, we showed the Walt Disney Company with a beta of 1.03. Another blue-chip stock, The Coca-Cola Company has a beta of 0.60. So, you can have quite a difference in volatility between two stocks that, based on market cap and other factors, look to be equal.

Using our example above, if an investor was looking for growth, they will want to look at stocks that have a beta above 1 (like Microsoft, for example). This gives them a greater chance of a higher return for a higher risk of the stock losing value when the market goes down. However, they can hedge this volatility by adding a variety of stocks that are closer to 1, depending on their risk tolerance. Investors who are more active traders may also wish to look at stocks with negative betas if they predict the market will go down.

As we mentioned above, it’s important to understand what beta is using a benchmark and the timeline that is being measured. If an investor is looking at a mining stock or ETF for example, knowing that it has a negative beta, while helpful, may be somewhat obvious. They may need more information to perform greater fundamental or technical analysis to better assess whether a stock belongs in their portfolio. One way to do this may be to calculate its beta as compared to a precious metals index.

Also, beta does not take into account recent news events that may impact a stock. There are some programs that will calculate a time-varying beta estimate which attempts to take into account factors that affect the characteristics of a company that may affect the way its beta is calculated. However, in general, it would take a significant change over a significant period of time to change a beta in a meaningful way. That's why day traders and other short-term investors look at other technical cues to decide on whether to invest in a stock.

High beta stocks do carry some risks. Stocks with high betas are more volatile in comparison to the overall market or index. Beta actually says nothing about the direction of a stock’s momentum in price, or the relative strength of the company. 

If a stock price is ballooning beyond the pace of the market, the company may be overvalued. Eventually, that bubble will pop, leaving investors with great losses. Smart investors and traders do not ride waves of hype. Conversely, a high beta may indicate that a company’s stock price is plummeting due to some current events that might have a longstanding negative impact, such as downsizing or bankruptcy. 

High beta stocks may indicate a history of frequent movement in opposition to the overall stock market. These types of stocks are generally volatile and can throw off investors who do not have experience riding market waves—that is, knowing when to buy and sell. If an investor is involved with active trading and prefers to minimize their risk, they can also balance out their trading with some low beta stocks. These less-volatile securities can stabilize their portfolio of stocks by compensating for some of the losses incurred by high beta stocks that deviate from an expected return. 

A smart beta strategy can be used to minimize the risk impact of high beta stocks. This type of strategy might combine something passive and more stable, like a dividend investing strategy, with active trading in order to minimize losses from the most volatile stocks in the fund. 

Investors working with high beta stocks are hoping to cash out on the stock price waves, buying low and selling high. They may have scoured lists of cheap stocks to buy or stock market gainers in their search for potential profits, but if they’re playing a short game like day trading, finding stocks with the most momentum can provide an easy entry and exit strategy to cash out on the same day. 

Beta only provides information about the momentum of individual stocks in relation to the stock market. Active trading involves looking at other stats and making decisions accordingly. However, high beta stocks will have price swings that can lead to great gains, if bought and sold appropriately. It’s important for active traders using the beta calculation (and other stats) to consider the alpha and beta of a stock—the former being an indicator of how much return a stock historically provides relative to its risk. 

Of course, investors looking for the most stable investments will want to look at a capital asset like rental property, treasury bills, or mutual funds—avoiding higher beta stocks, or even the whole process of analyzing beta and calculating risk as they buy and sell securities. But while these investment strategies can minimize losses, they don’t fund great gains, either. Investors who want steady gains but minimal risk should consider looking into securities that generate dividends

High Beta Stocks

Beta is one of the fundamental regression analysis metrics that an investor can use to assess the volatility of a stock compared to a benchmark index, such as the S&P 500. Although beta is not used to predict specific price movement, it provides a general sense of how a stock will trend compared to the overall market. 

Investors with a low-risk tolerance will probably want to have stocks with a beta of 1 or lower. Investors with a higher risk tolerance should look at stocks with a beta above 1 because of the potential for a higher return. Investors who are not interested in cashing out on a risk-reward relationship might explore other options, such as the best growth stocks. But even then, a stock’s beta can provide a forecast of how volatile it will be in the future—and in turn, build a capital asset pricing model to determine potential reward. 

Because of its utility as an assessment of volatility, beta is a metric used in both fundamental analysis and technical analysis. Beta can help investors take an objective look at their portfolio and give them direction on how to maintain proper diversification. However, like any metric, beta has its limitations. Investors who are looking for specific indicators will need to look beyond beta to assess if a stock is right for their portfolio, such as a fundamental analysis of a company.

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