Registered User
Joined: 1/16/2005
Posts: 33
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I have a column (Beta) with the understanding that this calculates the correlation coef.
Can you show me the formula that's used and if it is compared to SP-500 ? Thanks. Mike
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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I do not have a formula for the built in Beta Fundamental System Criteria, but the help files describe the calculations used:
Beta - The coefficient which measures the volatility of a stock's returns relative to the market (S&P 500). It is based on a 36/60-month historical regression of the return on the stock onto the return on the S&P 500: Ri = a + (Rm) + e where Ri is the monthly total returns on the stock, a is the stock's Alpha, Rm is the monthly total returns on the market (S&P 500), and e is a random error term. A minimum of 12 monthly returns are required for this calculation. A beta of 1 means that the market and the stock move up or down together, at the same rate. That is, a 5% up or down move in the market should theoretically result in a 5% up or down move in the stock. A beta coefficient of 2 suggests that the stock will tend to fluctuate twice as much as the market. That is, if the market moves up 5%, then the stock should move up 10%. A beta coefficient of 0.5 indicates that the stock will move one-half as much as the market, either up or down. A negative beta indicates the stock tends to move in the opposite direction from the general market. That is, the stock price declines when the overall market is rising, or rises when the overall market is declining. Negative beta stocks are rare.
-Bruce
Personal Criteria Formulas
TC2000 Support Articles
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