---
title: "Beta"
description: "Beta measures how strongly an instrument or strategy moves with the overall market — 1 moves in line, above 1 amplifies swings, below 1 dampens them."
canonical_url: "https://fincanva.com/docs/analysis/beta"
last_updated: "2026-09-12"
md_url: "https://fincanva.com/docs/analysis/beta.md"
---

# Beta

Beta measures how strongly an instrument or a strategy moves relative to the overall market: a beta of 1 moves in line with the market, a beta above 1 amplifies the market's swings, and a beta below 1 dampens them. Beta describes **exposure**, not quality — it says how much of the market's movement you carry, never whether the outcome was good. A negative beta means the instrument tends to move in the opposite direction to the market.

**Also seen as:** market beta; the risk it measures is called systematic risk (or market risk). Fincanva also uses the word "Beta" as a feature-maturity badge, which is a different thing entirely — see the next section.

## Why does Fincanva show two different things called "Beta"?

Two unrelated meanings share the word "Beta" in the app, and telling them apart is the first thing to get right.

- **Beta the metric** — the market-sensitivity number described on this page. It appears as the **Beta** column in screener results and as the quantity the **Beta Neutral** allocation method targets.
- **The "Beta" badge** — a small badge reading "Beta" sitting next to the **Fincanva score** card title. It marks that feature as being at a beta stage of development. It is a maturity label, not a number, and it carries no beta value at all. See [Fincanva score](/docs/analysis/fincanva-score).

There is no standalone beta row in the metrics table: **Performance Metrics** reports volatility and drawdown-based risk measures instead, and beta lives on the screener, on the allocation methods, and on a Combined's correlation tables. See [what every number in Performance Metrics means](/docs/analysis/what-every-number-in-performance-metrics-means) for what that table does report.

## How is beta calculated?

Beta is the covariance between the asset's returns and the market's returns, divided by the variance of the market's returns.

$$
\beta = \frac{\operatorname{Cov}(r_a,\; r_m)}{\operatorname{Var}(r_m)}
$$

where: $r_a$ is the asset's (or strategy's) return over each period, $r_m$ is the market's return over the same periods, $\operatorname{Cov}$ is covariance and $\operatorname{Var}$ is variance. Equivalently, beta is the slope of a regression line fitted to the asset's returns against the market's returns — which is why a beta of 1.5 reads as "1.5 units of movement for every 1 unit of market movement".

Because beta is a slope and not a spread, it is a different measure from [volatility](/docs/analysis/volatility): volatility says how much something moves, beta says how much of that movement tracks the market.

## Where does Fincanva use beta?

- **Screener results** carry a **Beta** column, so you can sort or read a candidate instrument's market sensitivity alongside its other figures.
- **Beta Neutral** is an allocation method whose description reads "Long + short legs sized to target a portfolio beta". Its **Target beta** field carries the hint "0.00 = market-neutral. Positive = net long exposure; negative = net short exposure." — so the method uses beta as an input you set, not as a result it reports. See [Beta Neutral](/docs/strategies/beta-neutral).
- Beta is measured against a **Benchmark instrument** you choose rather than a fixed index. That field's hint reads "The portfolio's beta is computed against this instrument."
- A **Use Adjusted Beta** switch is available on the same method, with the hint "Shrinks the OLS beta estimate toward 1.0 (Bloomberg \"Adjusted Beta\" — Vasicek 1973). Stabilises estimates on short windows." [Adjusted beta](/docs/analysis/adjusted-beta) is also the second reading offered beside a Combined's [correlation matrix](/docs/analysis/correlation-matrix), where each strategy carries one against each market factor.
- The **In-sample** field, in the **Leverage & calculation window** section, sets how much history the estimate reads. Its hint reads "Historical window used by the active method for volatility, correlation, beta, and similar calculations. Default 12."

## Defaults in Fincanva

- Beta is always relative to something, and what it is relative to depends on the surface: the reference instrument the allocation method is pointed at, or the market factor whose column you are reading in a correlation table — never a universal "the market".
- The screener's **Beta** column is a per-instrument figure, not a figure for your strategy.
- The metrics table has no beta row today: a strategy-level beta is not a performance metric. It is reported elsewhere — the tables beside a Combined's [correlation matrix](/docs/analysis/correlation-matrix) carry an [adjusted beta](/docs/analysis/adjusted-beta) for each strategy, and for the Combined itself, against each market factor.
- [Adjusted beta](/docs/analysis/adjusted-beta) is a separate variant — an estimate pulled toward 1.0 to steady it on short histories — and on the Beta Neutral method its toggle is on by default; turn it off to work from the raw fitted beta.

## Worked example

Take an instrument with a beta of 1.5 against its reference. On a day the market rises 1%, the instrument would be expected to rise roughly 1.5%; on a day the market falls 1%, it would be expected to fall roughly 1.5%. Across a −20% market fall, a beta of 1.5 points to roughly −30%.

Now compare an instrument with a beta of 0.5: the same −20% market fall points to roughly −10%. Both figures are averages fitted over past returns, not per-day promises — a high-beta instrument can rise on a day the market drops, and beta says nothing at all about the part of the return that is unrelated to the market, which is what [alpha](/docs/analysis/alpha) describes.

## What counts as a good value?

There is no good or bad beta, because beta is not a score. A beta near 1 means the position essentially rides the market; well above 1 means market moves reach you magnified in both directions; well below 1, or negative, means you are less exposed to the market's direction and more exposed to whatever else drives that instrument.

What beta does tell you is where a result came from: a strategy with high market exposure that gained in a rising market got much of that gain from the market itself, which is why beta is usually read next to a [benchmark](/docs/getting-started/benchmark) comparison rather than on its own.

*Beta is estimated from historical returns and describes past sensitivity, not future movement. Fincanva provides no financial advice — see [Is this financial advice?](/docs/investing-theory/is-this-financial-advice).*