- Beta is the risk metric in the capital asset pricing model and quantifies the relationship between an investment and the portfolio. Higher (lower) betas equate with relatively higher (lower) risk.
- It suffers several well-known and reportedly fatal flaws as a risk measure. But applied to asset classes in the context of portfolio design and management, beta is far from dead.
- Beta's track record is wobbly at best for stock portfolios, but the risk metric looks better for multi-asset class strategies.
For further details see:
Beta Is A Useful Risk Metric - If You Use It Correctly