PORTFOLIO BETA
BETA OF STOCKS
Beta is a statistical tool which tells us how how a share
price of the company would move if market moves in particular directions.
Similarly portfolio beta tells us how our portfolio s market value would move
when market rises
Let us see latest see how a portfolio is computed with an
example.
Now suppose we have to shares having price of 1000 and 2000
of companies X and y respectively, we have 5 shares of X and 2 shares of y x
has a beta of 2 and y has a beta of 3.
Now you can see that we have total investment of
5000 in company x come and 4000 in company y.now we can see that we have 55.5
percent investment in company X and 45.5 5% investment in company y. Show the
beta of portfolio would be 2*55.55+3*45.55= 2.4775 now if market most up by 1%
then our portfolio would rise by 2.4775% so let's see this with and practical
example in share market I will be generating a portfolio and we will see how we
can use beta to control our returns in a best possible way|
NAME
|
BETA
|
CLOSING PRICE
|
NO OF SHARE
|
INVESTMENT
|
BETA
|
|
|
Axis
Bank
|
1.38
|
743.15
|
275
|
₹
2,04,366.25
|
0.25
|
0.34
|
|
Bharti
Airtel
|
0.95
|
454.80
|
40
|
₹
18,192.00
|
0.02
|
0.02
|
|
BPCL
|
1.35
|
493.00
|
540
|
₹ 2,66,220.00
|
0.32
|
0.43
|
|
Reliance
Industries
|
1.22
|
1,571.40
|
29
|
₹
45,570.60
|
0.05
|
0.07
|
|
Tata
Motors
|
1.79
|
176.05
|
580
|
₹
1,02,109.00
|
0.12
|
0.22
|
|
TCS
|
0.93
|
2,231.70
|
24
|
₹
53,560.80
|
0.06
|
0.06
|
|
HDFC
Bank
|
1.03
|
1,302.40
|
27
|
₹
35,164.80
|
0.04
|
0.04
|
|
Sun
Pharmaceutical Industries
|
0.21
|
428.40
|
57
|
₹
24,418.80
|
0.03
|
0.01
|
|
Asian
Paints
|
0.81
|
1,807.55
|
19
|
₹
34,343.45
|
0.04
|
0.03
|
|
Adani
Ports and Special Economic Zone
|
1.53
|
366.90
|
124
|
₹
45,495.60
|
0.05
|
0.08
|
|
|
|
|
|
₹ 8,29,441.30
|
1.00
|
1.31
|
After beta is computed we will see e how to manage our
portfolio if market is volatile we would like to maintain our portfolio beta
near to 1 so that if market rises our portfolio also rises if market is in Bull
mode then why would increase our beta to increase our to increase our profit we
would reduce our beta if market is constantly is bearish.
|
NAME
|
BETA
|
CLOSING PRICE
|
NO OF SHARE
|
BUY
|
SELL
|
NO OF SHARE
|
AMOUNT
|
WEIGHTS
|
BETA
|
|
Axis
Bank
|
1.38
|
743.15
|
275
|
|
15
|
260
|
₹
1,93,219.00
|
0.22
|
0.30
|
|
Bharti
Airtel
|
0.95
|
454.80
|
40
|
180
|
|
220
|
₹
1,00,056.00
|
0.11
|
0.11
|
|
BPCL
|
1.35
|
493.00
|
540
|
|
500
|
40
|
₹ 19,720.00
|
0.02
|
0.03
|
|
Reliance
Industries
|
1.22
|
1,571.40
|
29
|
|
14
|
15
|
₹
23,571.00
|
0.03
|
0.03
|
|
Tata
Motors
|
1.79
|
176.05
|
580
|
|
300
|
280
|
₹
49,294.00
|
0.06
|
0.10
|
|
TCS
|
0.93
|
2,231.70
|
24
|
145
|
|
169
|
₹
3,77,157.30
|
0.42
|
0.39
|
|
HDFC
Bank
|
1.03
|
1,302.40
|
27
|
|
17
|
10
|
₹
13,024.00
|
0.01
|
0.02
|
|
Sun
Pharmaceutical Industries
|
0.21
|
428.40
|
57
|
150
|
|
207
|
₹
88,678.80
|
0.10
|
0.02
|
|
Asian
Paints
|
0.81
|
1,807.55
|
19
|
|
15
|
4
|
₹
7,230.20
|
0.01
|
0.01
|
|
Adani
Ports and Special Economic Zone
|
1.53
|
366.90
|
124
|
|
74
|
50
|
₹
18,345.00
|
0.02
|
0.03
|
In order to increase the beta we would buy the shares of
company having higher beta and sell the shares of company having lower beta and
vice versa for decreasing our beta.
Beta is a technical tool so it is advisable to know to
purchase or sell the stocks which are purchased for long term investment or on
basis of fundamentals of companies. If we need to change our portfolio and it
involves selling of companies selected based on fundamental analysis so and we
want to hold them we can buy securities or shares having higher or lower beta
with additional capital rather than moving capital within the portfolio.
In order in order to reach the beta of 1 would
following steps in our portfolio
That's that's all for portfolio beta we would learn about
mole concept in next post be happy and happy trading.
0 Comments