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Stock Betas: Stable, Volatile, or Risky

If two competitive companies have the same stock beta, what does that say about the stock. Is it stable, volatile or risky? For example, Amgen and Merck have betas of 1.35.

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Beta measures a stock's volatility, the degree to which its price fluctuates in relation to the overall market. In other words, it gives a sense of the stock's market risk compared to the greater market. The Beta factor measures how volatile a stock is when compared with an index. The higher the beta, the more volatile the stock is. A negative beta means that the stock moves inversely to the market so when the index rises the stock goes down and vice versa.

Stock portfolios are measured for risk using Beta. Stocks ...

Solution Summary

This solution discusses the implications of two competitive companies having the same stock beta.