How to Calculate Beta using Covariance and Variance

This video shows how to calculate the beta of a stock using the covariance of the stock with the market index.

Beta is equal to:
(1) the covariance of a company's stock returns with the returns of the market index (e.g., the returns of the S&P 500)
divided by
(2) the variance of the returns of the market index.

Covariance / variance = beta

For example, if we are examining monthly stock returns for a company called Fluffy Love and the S&P 500 for the past five years, and we find that the covariance between the returns of Fluffy Love and the returns of the S&P 500 is 0.8, while the variance of the returns of the S&P 500 is 0.4, this means that Fluffy Love has a beta of 2.—
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[ghada]

You're a life saver sir and this channel is nothing short of a gold mine

[rb]

I just have to say something else: doing this mannually is much more easy, at leat for me, to understand that. thank you again.

[rb]

Thank you very much for this simple and highly comprehensible explanation of this important subject.

[pke]

The (n-1)s cancel out in Beta and can be skipped if Beta is all you're after. You only need them if you are also interested in the covariance and variance (and have a relatively small sample size).

[jiayiwang]

better than my finance prof... thank you so much

[bm___]

How do you calculate the Square deviation of 2.3℅ and So on😢

[detiboy]

Hello, could you please make a video on how to calculate the beta of bonds. Which is the market to take as reference?

[SaiCharan]

Thanks for the videos this channel is very helpful did my exams with this help

If Possible please do a video on derivatives

[jessesolorzano]

This is such a great video - Thank you!

One question: which monthly market return are you using?

[richardsalley]

Thank you very much for this excellent example!

[troybird]

This video would help for your final in statistics!

[reinieramarante]

I have difficulty computing when it comes to product of derivation and squared derivation. The answer is different 😕

[Franckzzz]

Why did you do multiplication by 1/n-1 and then do division by n-1. I know it the same but why use the two?

[ivornworrell]

*Hello, can you please explain a bit more why you subtracted 1 from n at abot **5:54** in the video? thank you.*

[azboshippuden]

God bless you thank you so much for this video

[umbertobombace]

I don't get why you divide by n-1 instead of n

[Rajannogamiya]

why you are dividing by N-1 my answer in coming by dividing only with N
please look into it

[theanmol]

Sir we know formula of Beta is = Covariance(stock, market)/ 1

But sir why do we say that if a firm has Beta equal to 1.75.
If market returns increases by 1% then the company/firm will increase by 1.75% .

How can we use the equation 1 which i mentioned & come up with the conclusion written in the next line.

Awaiting your reply...
Thanks Sir :)

[hmmm]

So the variance is the same as standard deviation?

[palostaponjr]

anybody know please why not included in variance squared for bubsy, waiting reply..thank you very much