Portfolio Beta vs Market Volatility Calculator

Analyze your portfolio\'s beta, volatility, and risk-adjusted returns. Compare performance to market benchmarks and understand your true exposure.

Total value of your investment portfolio

Annual return of your portfolio

Annual standard deviation of portfolio returns

Benchmark market return (e.g., S&P 500)

Benchmark market volatility (standard deviation)

Correlation between portfolio and market (0 to 1 for most

Treasury rate for performance calculations

Beta = Correlation × (Portfolio StdDev / Market StdDev)\nAlpha = Portfolio Return - (Rf + Beta × (Market Return - Rf))\nTracking Error = √(σ²p + σ²m - 2ρσpσm)\nSharpe = (Portfolio Return - Rf) / Portfolio StdDev\nTreynor = (Portfolio Return - Rf) / Beta
Portfolio Return: 18% | Volatility: 22%\nMarket Return: 10% | Volatility: 15%\nCorrelation: 0.85 | Risk-Free: 4%\n\nBeta = 0.85 × (22/15) = 1.247\nAlpha = 18% - (4% + 1.247 × 6%) = 6.48%\nSharpe = (18-4)/22 = 0.636\nR² = 0.85² = 72.25%

What is portfolio beta?

Beta measures how your portfolio moves relative to the market. A beta of 1.0 means your portfolio moves with the market. Beta of 1.5 means it moves 50% more - more volatile. Beta of 0.5 means half as volatile - more defensive. It measures systematic (market) risk only.

How is beta different from standard deviation?

Standard deviation measures TOTAL volatility - both market-driven and unique to each asset. Beta measures ONLY the market-related (systematic) portion. A volatile stock with returns unrelated to the market has high std dev but low beta. Beta tells you how much market moves affect your portfolio.

What is a good portfolio beta?

It depends on your goals and risk tolerance. Conservative investors prefer 0.5-0.8 (defensive). Moderate investors target 0.8-1.2 (market-aligned). Aggressive investors seek 1.2-1.5+ (high growth potential). Retirees often want < 0.8. Young investors can tolerate > 1.0 for higher potential returns.

What is alpha in investing?

Alpha is the portion of returns NOT explained by beta (market movements). Positive alpha means you've earned more than expected given your market risk. It represents skill or unique strategy value. Alpha = Actual Return - (Risk-Free + Beta × Market Risk Premium). 2% alpha means you beat expectations by 2%.

What is R-squared?

R-squared (R²) measures what percentage of portfolio volatility comes from market movements. R² of 0.80 means 80% of your portfolio's risk is market-related, 20% is unique/unsystematic. High R² (>0.7) means beta is meaningful. Low R² means your portfolio is less tied to the market.

What is tracking error?

Tracking error measures how much your portfolio deviates from the benchmark. High tracking error means you're taking active positions away from the index. Low tracking error means you're closely following the market. It's the standard deviation of the difference between portfolio and benchmark returns.

How do I calculate portfolio beta?

Beta = Correlation × (Portfolio Std Dev / Market Std Dev). Alternatively, Beta = Covariance(Portfolio, Market) / Variance(Market). Calculate using historical returns: collect portfolio and market returns, find correlation and std devs, then apply the formula. Many platforms calculate this automatically.

What is the Treynor ratio?

Treynor Ratio measures risk-adjusted returns using BETA (systematic risk) instead of total volatility. Formula: (Portfolio Return - Risk-Free Rate) / Beta. Like Sharpe but only penalizes market risk, not diversifiable risk. Useful for well-diversified portfolios where total risk matters less than market risk.