Beta Calculation

Beta is the sensitivity of an investment's returns as compared
to a benchmark. This benchmark is commonly the S&P 500, but Fund Manager
allows you to assign any investment as the benchmark. See the
Benchmark Dialog. A benchmark
must be assigned before beta calculations can be made.

A beta value less than 1 indicates the investment is less volatile than the
benchmark. A beta value equal to 1 means the investment's volatility is
the same as the benchmark, and a beta greater than 1 means the investment is
more volatile.

#### Calculation Details:

When calculating the beta of an investment the simple monthly returns over
the specified comparison period are
calculated. The simple monthly return is:

Return = (End_price + Dist_per_share - Start_price) / Start_price

The returns for both the investment and benchmark are calculated. If
the comparison period is 5 years, there are 60 monthly returns for each the
investment and the benchmark. To calculate the beta, these 60 data
points are plotted with the benchmark returns along the X axis, and the investment returns
along the Y axis. The slope of a best-fit line through these data points is the
Beta.

where '*n*' is the
number of data points (60 in this example), and '*x*'
are the benchmark returns, and '*y*'
are the investment returns. When calculating returns your current
interpolation range preferences are used.
If sufficient pricing data is not available the Beta will not be reported.

The beta for a portfolio, asset type, goal, or investment type is a weighted
average of the beta's from the investments in that group. The weighting is
based on the ending value.

#### Advanced:

Fund Manager can output the data points used in this calculation to a log
file. By default the logging feature is turned off. To turn it on,
create a new registry string value at:

HKEY_CURRENT_USER\Software\Beiley Software\Fund Manager\CurrentVersion\techanal

named "benchmarklog" and set it to a value of "1". The log file is
named "stats_log.txt", and will be located in your user's AppData\Roaming\Fund
Manager folder (usually a hidden folder). This log file is deleted upon exiting Fund Manager.

### See Also

Benchmark Dialog

Custom Report

Correlation

Sharpe Ratio

Standard Deviation of Returns