[Verse 1] In the markets where the numbers dance and sway Beta tells us how your stock will play When the market jumps by ten percent today Will your shares climb more or drift away? It's the measure of sensitivity How your asset moves with volatility [Chorus] Beta equals one means market pace Higher than one, you're in the race Lower means you're moving slow Beta shows which way you'll go Covariance over variance squared That's the formula that gets you there [Verse 2] Take your historical returns and plot them clean X-axis market, Y-axis your machine Sixty months of data points will do the trick Regression line reveals the magic pick The slope becomes your beta coefficient Risk and reward relationship sufficient [Chorus] Beta equals one means market pace Higher than one, you're in the race Lower means you're moving slow Beta shows which way you'll go Covariance over variance squared That's the formula that gets you there [Bridge] Defensive stocks have beta less than one Utilities and food when trouble's come Aggressive growth shows beta greater still Technology and small caps climb uphill R-squared tells you how the model fits Standard error shows where confidence sits [Verse 3] Calculate the market's excess return Subtract the risk-free rate, watch how they burn Do the same thing for your chosen stock Time series data forms your building block Excel regression or by hand you'll find Beta measurement for the analyst mind [Chorus] Beta equals one means market pace Higher than one, you're in the race Lower means you're moving slow Beta shows which way you'll go Covariance over variance squared That's the formula that gets you there [Outro] When portfolios need systematic risk Beta estimation is your analysis disk From regression output read the truth Beta guides your investment proof
← Cost of Equity - Bond Yield Plus Risk Premium | Advanced Beta Techniques →