Beta Metric

Beta (

\beta

) measures the systematic risk (or volatility) of your algorithmic strategy compared to a benchmark index (like the Nifty 50). While Standard Deviation measures absolute risk in a vacuum, Beta measures relative risk. It tells you exactly how sensitive your portfolio is to macro market movements.

The Mathematical Formula

Beta is calculated by dividing the covariance of the portfolio and the benchmark’s returns by the variance of the benchmark’s returns:

\beta = \frac{Cov(R_p, R_m)}{Var(R_m)}

Interpreting Your Beta Score

When reviewing your backtest, use the benchmark value of exactly 1.0 as your baseline:

Beta Value	Market Sensitivity	Tactical Reality
Exactly 1.0	Neutral	The portfolio moves perfectly in sync with the benchmark. If the market drops 5%, your portfolio drops 5%.
Greater than 1.0	High Beta (Aggressive)	The portfolio is structurally more volatile than the market. A Beta of 1.5 means if the market rises 10%, the portfolio rises 15% (but also falls 15% if the market drops).
Between 0 and 1.0	Low Beta (Defensive)	The portfolio is insulated from market shocks. A Beta of 0.5 means the portfolio only experiences half the volatility of the broader market.
Below 0 (Negative)	Inverse Beta	The portfolio structurally moves in the opposite direction of the market, serving as a direct hedge.

Information Ratio Portfolio P/E & P/B Ratio

Getting Started

Basket Builder

Analyze Your Portfolio

Stock Research

Research Tools

Performance Metrics (Glossary)

The Mathematical Formula

Interpreting Your Beta Score

​The Mathematical Formula

​Interpreting Your Beta Score

The Mathematical Formula

Interpreting Your Beta Score