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How to Calculate Beta using Correlation and Volatility

This video shows how to calculate the beta of a stock using the correlation of the stock with the market index. Beta is equal to: (1) the correlation of a company's stock returns with the returns of the market index (e.g., the returns of the S&P 500) times the standard deviation of the company's stock returns divided by (2) the standard deviation of the returns of the market index. The standard deviation of stock returns is also known as volatility. [Correlation * volatility (stock)] / volatility (market) = beta For example, let's say we are examining monthly stock returns for a company called Fluffy Love and the S&P 500 for the past five years, and we observe the following: Correlation = 0.5 Volatility (Fluffy Love) = 30% Volatility (S&P 500) = 20% Fluffy Love's beta would be 0.75. This was calculated as follows: (0.5 * 30%) / 20% = 0.75— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world. — SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS: • A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING • A 44-PAGE GUIDE TO U.S. TAXATION • A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS • MANY MORE FREE PDF GUIDES AND SPREADSHEETS * http://eepurl.com/dIaa5z — SUPPORT EDSPIRA ON PATREON *  / prof_mclaughlin   — GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT * https://edspira.thinkific.com — LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast... * Spotify: https://open.spotify.com/show/4WaNTqV... * Website: https://www.edspira.com/podcast-2/ — GET TAX TIPS ON TIKTOK *   / prof_mclaughlin   — ACCESS INDEX OF VIDEOS * https://www.edspira.com/index — CONNECT WITH EDSPIRA * Facebook:   / edspira   * Instagram:   / edspiradotcom   * LinkedIn:   / edspira   — CONNECT WITH MICHAEL * Twitter:   / prof_mclaughlin   * LinkedIn:   / prof-michael-mclaughlin   — ABOUT EDSPIRA AND ITS CREATOR * https://www.edspira.com/about/ * https://michaelmclaughlin.com