What Is the Beta Metric?

Beta is another metric we use at Rootmont to gauge a coin’s volatility compared to the overall market. Here are some examples.

β < 1: Less volatility with more safety, but less overall return. These investments out-perform when market prices are high, but under-perform during market corrections.

β > 1: More volatility with less safety, but greater return. These investments under-perform when market prices are high, but out-perform during market corrections.

β = 1: Equal volatility. This means that the coin mirrors overall market patterns.

The Beta calculation is based on the following equation:

β = covariance/variance

Covariance describes a single investment’s returns in relation to to the market’s returns. Variance describes how far the data points spread out compared to their average value.

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