Interestingly, the data supports this theory. From March 13, , till August 21, , Zoom had a beta of This was a significant change from the days before the pandemic. Zoom had a beta of 1. The high beta stock became a negative beta stock in a matter of weeks. More intriguingly, with high vaccine coverage and events, Zoom appears to be reverting to a high positive beta stock.
Negative betas may be a rare occurrence, but Zoom's example demonstrates the presence of one of the many anomalies in the financial ecosystem. Apr Odd Cases of Negative Beta Values. Recent Posts See All. Videocon- Vedanta: The Resolution Process.
An investment with zero beta means no volatility and no risk. This would leave out stocks. Of course, inflation erodes the purchasing power of money, meaning your zero-beta investment actually loses if it pays interest at less than the rate of inflation.
A negative beta correlation means an investment moves in the opposite direction from the stock market. When the market rises, a negative-beta investment generally falls. When the market falls, the negative-beta investment will tend to rise.
This is generally true of gold stocks and gold bullion. Because gold is seen as a more secure store of value than currency, a market crash prompts investors to sell their stocks and either move into cash for zero beta or buy gold for negative beta.
Negative beta is an unusual concept, as it pertains to the stock market. Rather, it simply reflects the fact that Arena's movements are determined much more by company-specific news like Belviq's sales than by overall market action. Investors shouldn't look at Arena as being low-risk just because of its negative beta.
Given the fairly constant need for its products, Ferrellgas has seen solid demand, and as a master limited partnership, it pays a healthy dividend yield to investors. Recession-resistant businesses like Ferrellgas often have little or no correlation to the market. In this case, a negative beta just a hair under 0 doesn't have any more significance than a positive 0. Ferrellgas will move with gas prices more than with the broad market. The company has had to boost its production estimates for the full year twice , with its latest guidance pointing to more than 1 million ounces of gold production.
With cash costs on the decline, Agnico-Eagle has posted a strong advance recently. Gold and other precious-metals producers often move against the market, because gold often attracts safe-haven money when stocks start to decline. That relationship has fallen lately, which explains why the negative beta is relatively low, but many investors use gold miners like Agnico-Eagle as hedges to diversify their portfolio exposure. With its own niche from its unique namesake beverage, Dr Pepper has found ways to sustain its business regardless of the strategies of its larger competitors.
Big stocks tend to be included in index funds that increase correlation, but smaller companies like Dr Pepper often avoid that effect. Dr Pepper is a relatively safe stock with a devoted customer base that sees the product as a necessity, and that should support demand going forward.
The right way to invest in negative-beta stocks The key to investing in these unusual stocks is not to draw generalizations based on beta. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. What Is the Beta? Analyzing Beta. Why Beta Is Important.
Where to Find the Beta Number. Warnings About Beta. Key Takeaways Beta indicates how volatile a stock's price is in comparison to the overall stock market. A beta greater than 1 indicates a stock's price swings more wildly i.
A beta of less than 1 indicates that a stock's price is less volatile than the overall market. A beta of 1 indicates the stock moves identically to the overall market.
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