"Beta coefficient" is a statistical concept, a numerical value between+1 and-1, which reflects the performance of an investment object relative to the broader market. The greater its absolute value, the greater the change of its income relative to the broader market; The smaller the absolute value, the smaller the change range relative to the market. If it is negative, it means that the direction of change is opposite to that of the broader market: if the broader market goes up, it will fall, and if the broader market falls, it will rise. Because the purpose of investing in investment funds is to obtain financial services from experts, so as to obtain better performance in the market than passive investment, this index can be used as an index to examine the ability of fund managers to reduce the risk of investment fluctuation.
When calculating the beta coefficient, besides the performance data of the fund, it also needs to be used as an indicator to reflect the market performance.
β coefficient application:
Beta coefficient reflects the sensitivity of individual stocks to market (or broader market) changes, that is, the correlation between individual stocks and broader market or "stock" in popular parlance. Securities with different beta coefficients can be selected according to the market trend forecast to obtain additional income, which is especially suitable for band operation. When a big bull market or a non-rising stage of the market is predicted with confidence, you should choose those securities with high beta coefficient, which will multiply the market yield and bring you high returns. On the contrary, when a bear market comes or a certain decline stage of the market comes, you should adjust your investment structure and choose those securities with low beta coefficient to resist market risks and avoid losses. In order to avoid non-systematic risks, we can choose those securities with the same or similar beta coefficient for portfolio under the corresponding market trend. For example, the beta coefficient of a stock is 1.3, which means that when the market rises 1%, it may rise by 65433. But if the beta coefficient of a stock is-1.3%, it means that when the market rises 1%, it may fall 1.3%. Similarly, if the market falls by 1%, it may rise by 1.3%.