Beta is used to measure the risk level of securities in relation to the overall market. Beta values do not have a limit, they can range from negative infinity to positive infinity. However, the vast majority of beta values will lie between 0 and +2. Beta values can be interpreted using the following guidelines:

(i) If Beta > 1, the security has above average risk and returns are expected to be more extreme and in the same direction as the market. If market returns go up 1%, security returns on average go up >1%.

(ii) If Beta = 1, then the security has average risk and returns are expected to be similar to the market. If market returns go up 1%, security returns on average go up 1%.

(iii) If 1> Beta >0, then the security has below average risk and returns are expected to be more less extreme and in the same direction as the market. If market returns go up 1%, security returns on average go up <1%.

(iv) If Beta = 0, then the security has below average risk. The security returns may be constant or if not constant then varying totally independently from market returns.

(v) If Beta < 0, then security has very low risk and returns are expected to move in opposite direction with the market. This type of security is not common and may be insurance related. These securities may be very useful in reducing portfolio risk.