Glossary term
Beta
The sensitivity of an asset's returns to overall market movements; a beta of 1 moves with the market, the companion concept to alpha.
Beta is the sensitivity of an asset's returns to movements in the broad market, where a beta of 1 moves in line with the market, above 1 amplifies it, and below 1 dampens it. It is the companion to alpha: beta is the return explained by market exposure, alpha is the excess beyond it. Closelook uses beta to size hedges so that a position's market exposure is deliberately set rather than accidental. See Reference Portfolios.