1. What is the Beta Portfolio Calculator?

The Beta Portfolio Calculator for Forex calculates beta, which measures the volatility of a portfolio relative to the market. It is a key metric in portfolio management and risk assessment.

2. How Does the Calculator Work?

The calculator uses the beta formula:

Where:

• \( Correlation \) — Correlation coefficient (dimensionless)
• \( \sigma_p \) — Standard deviation of the portfolio
• \( \sigma_m \) — Standard deviation of the market

Explanation: Beta indicates how much the portfolio is expected to move relative to market movements. A beta greater than 1 indicates higher volatility than the market, while less than 1 indicates lower volatility.

3. Importance of Beta Calculation

Details: Accurate beta calculation is crucial for assessing portfolio risk, optimizing asset allocation, and making informed investment decisions in forex markets.

4. Using the Calculator

Tips: Enter correlation coefficient (between -1 and 1), standard deviation of the portfolio, and standard deviation of the market. All values must be valid (standard deviations > 0).

5. Frequently Asked Questions (FAQ)

Q1: What does a beta value of 1 mean?
A: A beta of 1 means the portfolio's price moves with the market. It has the same volatility as the market.

Q2: Can beta be negative?
A: Yes, a negative beta indicates that the portfolio moves in the opposite direction to the market.

Q3: How is correlation calculated?
A: Correlation is calculated using historical price data of the portfolio and the market, typically using statistical software or financial calculators.

Q4: What are the limitations of beta?
A: Beta is based on historical data and may not predict future movements. It also assumes normal market conditions and may not account for sudden market changes.

Q5: Is beta the only measure of risk?
A: No, beta is one measure of systematic risk. Other measures include standard deviation, alpha, and Sharpe ratio, which provide additional insights into risk and return.