A stock had a 12 % return last year, a year when the overall stock market declined. Does this mean that the stock has negative beta and thus very little risk if held in a portfolio?

Question

Business

Yasmin Russo

15 July, 20:38

A stock had a 12 % return last year, a year when the overall stock market declined. Does this mean that the stock has negative beta and thus very little risk if held in a portfolio?

+5

Answers (1)

Know the Answer?

Solis · Answer 1

Yes it has a negative beta but this does not translate to very little risk

Explanation:

A negative beta correlation means an investment moves in the opposite direction from the stock market.

A negative beta coefficient does not necessarily mean absence of risk. Instead, negative beta means your investment offers a hedge against serious market downturns.