how to find portfolio beta This is a topic that many people are looking for. thetruthaboutdow.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, thetruthaboutdow.org would like to introduce to you How to Calculate the Beta of a Portfolio. Following along are instructions in the video below:
“This video. We re going to talk about how to calculate the beta of an an entire portfolio so let s say that you. Invested 2000 in. Walmart stock.
8000 intel stock in the 10000 in amazon and you know that the beta for each of these firms. Right you can go to yahoo finance and look up and say ok walmart. Is 038 intel s. 086 and amazon s 146.
Right you can tell that but how do you calculate the beta for this entire portfolio that you have here right you want to know how much systematic risk. The portfolio has not just the individual stocks right so how would you go about doing that well you can calculate a weighted average and to do that we re going to need to first calculate what s the total amount you have invested here so if we add up the 2000. The 8000 and the. 10000 that gives us a total of.
20000 and now that we know you have a total of 20000. Dollars invested. We can go and calculate the weighted average and as follows so. Walmart is 2000 of the.
Entire 20000 right so. 2000 out of 20000. Is the same as 2 over 2 over 22 twentieths so we re going to multiply that by walmart s. Beta which is 038.
Right so walmart is 2 twentieths of your position. We re going to multiply that by walmart s beta. Okay now what we re going to do is we re going to add to that we re going to. Do intel which is eight thousand dollars and eight.
8000 out of 20000. Is the same as 8 over 20 and then we re going to multiply that by intel s beta. Which is zero point eight six and then we are going to add to that the weighted average part of amazon here amazon. Is 10000.
20000 and we multiply that by amazon s beta of 10. One point four six to one point four six and so now we go ahead and we just we just basically do the multiplication of each of these three parts right to do the weighted average and then and then add them together. So. If you do the math here that s going to give you a beta of 1 point 1 1.
Actually 1 point 1 1 2. But i just rounded it here so it rounded to 1 point 1 1. Is the beta. I m going to use the greek letter here the beta of the portfolio.
Okay now that tells you how much systematic risk right that s what beta it s a measure of systemic risk 1 point 1 1 is how much systematic risk. There is in this portfolio that you ve put together and you notice that that one point 1 1. This is greater than the average systematic risk or the systematic risk of an ” ..
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