Is there any indicator or measure which can be used to determine the degree of corellation of a stock with the broader market. I like to find stocks which are least bothered by either bull or bear run of the market.

  • 2
    Low Beta or Low R-squared
    – base64
    Commented Sep 30, 2015 at 6:48
  • @base64 R-squared it is.. :) Can you help me with how to calculate R-squared?
    – shravan
    Commented Sep 30, 2015 at 8:12
  • Google is your friend. It's not a simple do this type of problem. khanacademy.org/math/probability/regression/…
    – Ross
    Commented Sep 30, 2015 at 19:42
  • 1
    @Ross Got it. RSQ Function in excell will do the job. Now looking for a way to screen multiple stocks to find stock with lowest RSQ with the index.
    – shravan
    Commented Oct 1, 2015 at 2:17
  • 2
    @shravan You can use Yahoo!'s API to pull a lot of finance things, also if you know how to use google sheets I believe they have a built in finance API as well.
    – Ross
    Commented Oct 1, 2015 at 13:07

1 Answer 1


Beta is the correct answer. It is THE measure of the risk relationship of a stock with the broad market.

R squared is incorrect unless you mean something very odd by "co-efficiency." A stock that goes up each time the market goes down has very low co-efficiency (negative risk as you have defined it) but very high R squared. A stock that goes the same direction as the market but twice as far (with a lot of noise) has a very low R squared but contains a lot of market risk. A stock that always goes in the same direction as the market but only a 100th as far is very safe but has a very high R squared.

You can calculate beta using "slope" in excel or doing a regression, but the easiest thing is just to look up the beta in yahoo finance or elsewhere. You don't need to calculate it for yourself normally.

  • Correlation should be the word.
    – shravan
    Commented Feb 18, 2016 at 16:52
  • Correlation is a different statistic that can be computed, but it is not as useful for measuring the risk of a security or relationship with the market because it doesn't include information about magnitude. That is, if one stock goes up and down twice as far as the market while another goes up and down half as far, they may both have the same correlation with the market. If you are analyzing portfolios, you almost always want beta. Are you resistant to beta for some reason?
    – farnsy
    Commented Feb 18, 2016 at 19:40
  • By the way, Beta is equal to the correlation between a stock and the market times the standard deviation of the stock divided by the standard deviation of the market.
    – farnsy
    Commented Feb 18, 2016 at 19:54

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