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Definition: Beta

Beta is a measured used in portfolio management which is a risk factor for a single asset or a portfolio of assets. It represents the systematic risk i.e. the non-diversifiable risk of an asset/portfolio.

It is generally measured as the correlation between the returns on an asset with the returns of the market portfolio which is generally the returns on a representative index such as the S&P 500.

Mathematically, beta is expressed as:


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