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Your portfolio is comprised of 36 percent of Stock X, 18 percent of Stock Y, and 46 percent of Stock Z. Stock X has a beta of 1.19, Stock Y has a beta of .87, and Stock Z has a beta of 1.26. What is the beta of your portfolio?

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Answer:

Portfolio´s beta: 1.16

Explanation:

Stock         Percent         Beta Weighted Beta

  X                    36%          1,19                   0,43

  Y                    18%         0,87           0,16

  Z                    46%          1,26           0,58

                                                     1,16

The portfolio beta is obtained by the sum of the individual betas of each stock considering it´s  percent on the portfolio (weighted beta).

It represents the relative volatility of a portfolio relative to the market. More than one means more volatile and less than one means less volatile than the market.

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