From the course: Excel for Investment Professionals

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Computing beta of an asset

Computing beta of an asset - Microsoft Excel Tutorial

From the course: Excel for Investment Professionals

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Computing beta of an asset

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- [Instructor] Often times, when you're evaluating a portfolio, you may need to go through and determine what the beta is on a particular asset within that portfolio. Beta helps us to determine how risky a particular stock is in relation to the market overall, which in turn helps us determine whether or not that stock belongs in our portfolio. It's a good alternative method versus correlation or covariance, which can be computationally intensive. Let me show you how to determine your beta in Excel and I'm actually going to show you two different methods. I'm in the zero, three, zero, seven begin Excel file. Now what we've got here are two different assets and their respective returns for a year on a month-by-month basis. We've also got returns for the market overall. So the first I'm going to need to do in order to calculate my beta is to go through and determine the variance of the market overall. So I'm going to use the VAR dot S formula and now I need to determine the covariance…

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