A stock had a 12 % return last year, a year when the overall stock market declined. Does this mean that the stock has negative beta and thus very little risk if held in a portfolio?

Question

Drake Woodward

Business

25 May, 21:35

A stock had a 12 % return last year, a year when the overall stock market declined. Does this mean that the stock has negative beta and thus very little risk if held in a portfolio?

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Answers (1)

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Karina Morton · Answer 1

Yes it has a negative beta but this does not translate to very little risk

Explanation:

A negative beta correlation means an investment moves in the opposite direction from the stock market.

A negative beta coefficient does not necessarily mean absence of risk. Instead, negative beta means your investment offers a hedge against serious market downturns.