- Risk that applies to the entire market
- Interest rate changes
- You cannot use diversification to avoid this risk.
- Risk that applies to a specific sector/industry.
- Can be reduced through diversification.
- A measure of a stock’s volatility compared to the market.
- A beta of 1 means it is in-sync with the market. A beta of greater than 1 means the stock is historically more volatile than the market. A beta of less than one implies the stock has been less volatile than the market.
- In general, conservative investors will like low beta stocks and speculators will like high beta stocks.