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What does the Beta Factor Express?

The portfolio beta calculates the extent to which the equity portfolio reacts more strongly (or more weakly) to general price fluctuations than the index to which it is compared.

Betas are historical indicators. To calculate betas, the price development of the index is compared each day (over a certain period of time) with the development of a certain share or an entire equity portfolio (this is called "regression analysis").

Thus, in contrast to correlation, the beta indicator gives an indication of the extent of price fluctuation. The correlation coefficient merely measures the direction.

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