- Download historical security prices for the asset whose beta you want to measure.
- Download historical security prices for the comparison benchmark.
- Calculate the percent change period to period for both the asset and the benchmark. …
- Find the variance of the benchmark using =VAR.
If you are looking to calculate beta in Excel, you have come to the right place. Beta is a measure of the volatility of a stock or portfolio relative to the market as a whole. It is an important metric used in financial analysis and is calculated by comparing the returns of a stock or portfolio to those of a market index. In this blog post, we will provide you with a step-by-step guide for calculating beta in Excel. We will cover various aspects of the process, from setting up the spreadsheet to interpreting the results. By the end of this post, you should have a solid understanding of how to calculate beta in Excel. Our goal is to make the process of calculating beta in Excel as simple and straightforward as possible, so get ready to unlock the power of this financial metric.
How To Calculate Beta on Excel – Linear Regression & Slope Tool
How to understand beta
Heres how you can interpret beta once you calculate it:
What is beta?
Investors can determine a stock’s volatility by comparing it to the market as a whole using beta. How drastically the price can fluctuate over time is referred to as the stock’s volatility. It’s a typical method of figuring out how much risk brokers attach to the price of a stock. As a result, brokers may be able to choose which stocks to buy based on their investment philosophy.
What information do you need to calculate beta?
You need the following three pieces of information to calculate beta:
Calculating beta using a formula
This is how you can calculate beta using a formula:
1. Type the formula
Click on the blank cell where you want to display your beta to get started. Since you can use two different formulas to arrive at the same number, you have choices. You can either start by typing “=COVARIANCE. P(” or “=SLOPE(. “.
2. Highlight the range with the stock returns
Click and drag from the top to the bottom of the cell range containing your stock returns without deselecting the box containing your formula. The cell range is automatically entered into the formula by Excel and appears as blue text. You can fill in the other variable once you’re certain you’ve highlighted the entire column range for the stock.
3. Select the range with the market returns
First, separate the two types of data by a comma. Once you’ve done that, you can highlight the range for the same date range as your stock returns that contains the market returns. This range in the “X variable” range is filled in automatically by Excel and appears in your formula as red text.
4. Enter the formula
Once the data in your formula has been successfully entered, you can complete the formula. For the “SLOPE=” option, close the formula with a parenthesis. For the “=COVARIANCE. P(” option, type “/VAR. P(” and then choose the market returns column to complete it once more before closing the formula in the same manner.
Calculating beta using the analysis toolpak
You can also calculate beta using the “analysis toolpak” option by performing the following steps:
1. Install the analysis toolpak
Installing the analysis toolpak is simple if you don’t already have it. The “File” tab should be selected, followed by the “Options” and “Add-ins” categories. Click “Go” after selecting “Excel Add-ins” in the “Manage” box. Check the box next to “Analysis toolpak” in the “Add-ins” box, then click “Ok.” “.
2. Access the regression option
Install the “analysis toolpak,” then select “Data analysis” from the “Data” tab. Click “Ok” after selecting the “Regression” option from the pop-up menu. For the following step, you should concentrate on the “Input Y-range” and “Input X-range” key boxes. “.
3. Input your data
Choose the range of cells that contain the returns for your target stock by clicking on the “Input Y-range” box. Excel automatically fills the range out in the box. The range of cells containing the market returns should then be highlighted after clicking the “Input X-range” box. Once both boxes have been filled out with data, click “Ok “.
4. Find the beta
Based on the data you enter, the “analysis toolpak” creates a fresh summary output spreadsheet. The number for beta calculation is in the “X variable” row and the “Coefficient” column among other numbers that you can use for various types of analysis. The number located there is your beta.
Please be aware that Indeed is not connected to any of the products mentioned in this article.
FAQ
How do you calculate β?
The covariance of an asset’s return with the return of the benchmark, divided by the variance of the benchmark’s return over a specific period, is the formula for calculating beta.
How do you get beta 1 in Excel?
- Download the Stock Prices & Index Data for the last three years as the first step.
- Step 2 – Sort the Dates & Adjusted Closing Prices.
- Prepare a single sheet of stock prices data and index data in step three.
- Step 4 – Calculate the Fractional Daily Return.
- Step 5 – Calculate Beta – Three Methods.
