How to Calculate Stock Beta in Excel
Understanding Beta in Stock Investing
As an investor, it’s important to understand a stock’s beta to make informed investment decisions. Beta measures how responsive a stock is to changes in a broad market index, such as the S&P 500. This metric can help you determine how volatile a stock may be compared to the overall market.
If a stock has a beta of 1.0, it will move in sync with the index. A stock with a beta greater than 1.0 will be more volatile, while a stock with a beta less than 1.0 will be less volatile compared to the index. Knowing a stock’s beta can help you estimate its potential gains or losses in relation to the general market.
Calculating a Stock’s Beta in Excel
Calculating a stock’s beta in Excel can be complex, but there is an easier way. First, obtain the prices for the stock and its corresponding benchmark, such as the S&P 500, over a certain period of time. Then, input the data into two columns in a Microsoft Excel spreadsheet: the first column should contain the stock price returns, and the second should contain the corresponding benchmark returns.
Next, use the Covariance function to obtain the covariance of the two returns. Then, calculate the correlation between the stock and the benchmark using the Correlation Function. Finally, take the ratio of the covariance divided by the variance of the benchmark to obtain the stock’s beta.
Using MarketXLS for Easy Data Analysis and Visualization
MarketXLS is an all-in-one tool that provides advanced data analysis and visualization tools, including financial statement data, charting, historical market data, technicals, and data importation. With MarketXLS, you can easily analyze stocks and options, spot trends, and detect changes in the markets. It also helps investors find new trading or investing ideas with its data-driven algorithms, uncover changes in sector performance, and much more.
MarketXLS offers several functions related to beta to make the process easier.
| Function Title | Function Example | Function Result |
|---|---|---|
| Custom Beta Five Years | =CustomBetaFiveYears(“MSFT”) – Calculates beta against SPY on a daily basis. =CustomBetaFiveYears(“MSFT”,”AAPL”) – Calculates beta against AAPL on a daily basis =CustomBetaFiveYears(“MSFT”,”AAPL”, “monthly”) – Calculates beta against AAPL on a monthly basis =CustomBetaFiveYears(“MSFT”,”AAPL”, “weekly”) – Calculates beta against AAPL on a weekly basis |
A high beta means the stock price is more sensitive to news and information, and will move faster than a stock with low beta. In general, high beta means high risk, but also offers the possibility of high returns if the stock turns out to be a good investment. |
| Custom Beta One Year | =CustomBetaOneYear(“MSFT”) – Calculates beta against SPY on a daily basis. =CustomBetaOneYear(“MSFT”,”AAPL”) – Calculates beta against AAPL on a daily basis =CustomBetaOneYear(“MSFT”,”AAPL”, “monthly”) – Calculates beta against AAPL on a monthly basis =CustomBetaOneYear(“MSFT”,”AAPL”, “weekly”) – Calculates beta against AAPL on a weekly basis |
A high beta means the stock price is more sensitive to news and information, and will move faster than a stock with low beta. In general, high beta means high risk, but also offers the possibility of high returns if the stock turns out to be a good investment. |
| Custom Beta Three Years | =CustomBetaThreeYears(“MSFT”) – Calculates beta against SPY on a daily basis. =CustomBetaThreeYears(“MSFT”,”AAPL”) – Calculates beta against AAPL on a daily basis =CustomBetaThreeYears(“MSFT”,”AAPL”, “monthly”) – Calculates beta against AAPL on a monthly basis =CustomBetaThreeYears(“MSFT”,”AAPL”, “weekly”) – Calculates beta against AAPL on a weekly basis |
A high beta means the stock price is more sensitive to news and information, and will move faster than a stock with low beta. In general, high beta means high risk, but also offers the possibility of high returns if the stock turns out to be a good investment. |
| Debt to Equity Ratio (Last Quarter) | =hf_Debt_to_Equity_Ratio(“MSFT”,2022) – Returns the value for the year 2022. =hf_Debt_to_Equity_Ratio(“MSFT”,2022,2) – Returns the value for the year 2022 and the calendar quarter 2 =hf_Debt_to_Equity_Ratio(“MSFT”,2022,3,”TTM”) – Returns the value for the year 2022 and trailing twelve months from the calendar quarter =hf_Debt_to_Equity_Ratio(“MSFT”,”lq”) – Returns the value for the last quarter =hf_Debt_to_Equity_Ratio(“MSFT”,”lq-1″) – Returns the value for the last quarter-1 =hf_Debt_to_Equity_Ratio(“MSFT”,”ly”) – Returns the value for the last year =hf_Debt_to_Equity_Ratio(“MSFT”,”ly-1″) – Returns the value for the last year – 1 =hf_Debt_to_Equity_Ratio(“MSFT”,”lt”) – Returns the value for the last 12 months. =hf_Debt_to_Equity_Ratio(“MSFT”,”lt-1″) – Returns the value for the previous last 12 months. |
A “good” debt-to-equity (D/E) ratio will depend on the nature of the business and its industry. Generally speaking, a D/E ratio below 1.0 would be seen as relatively safe, whereas ratios of 2.0 or higher would be considered risky. Some industries, such as banking, are known for having much higher D/E ratios than others. Note that a D/E ratio that is too low may actually be a negative signal, indicating that the firm is not taking advantage of debt financing to expand and grow |
Use AI driven search for all functions on MarketXLS here: https://marketxls.com/functions
Download from the link below, a sample spreadsheet created with MarketXLS Spreadsheet builder
Note this spreadsheet will pull latest data if you have MarketXLS installed. If you do not have MarketXLS consider subscribing here
https://mxls-templates.s3.us-west-2.amazonaws.com/MarketXLS-Model-ID-r76gmT.xlsx
Relevant blogs that you can read to learn more about the topic
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