Indicators · Statistics
Beta: market beta explained, and what Finabase’s BETA study shows
What beta measures, how the regression slope is calculated, why McDonald’s market beta was near zero in 2026, and what Finabase’s 5-bar BETA chart study measures.
On this page
Beta is the slope of a line that relates one series of returns to another. In investing, it almost always means market beta: how much a stock tends to move when the market moves 1%. A beta of 1.5 means the stock has typically moved 1.5% for each 1% move in the index; a beta of 0.5, half as much; a beta near zero, not in step with the market at all. The idea comes from William Sharpe's 1964 Capital Asset Pricing Model.
Finabase's chart offers a study called BETA, and it is important to know that it does not measure market beta. It applies the same regression to two series from the same chart, the bar's highs and its lows, over just five bars. This guide explains market beta with real McDonald's and SPY data, works through Finabase's BETA study by hand, and explains what each one is good for.
Market beta
Take the daily returns of a stock and of a market index over the same days. Plot each day as a point, the index return on the horizontal axis and the stock return on the vertical. The slope of the best-fitting straight line through that cloud is the stock's beta.
- Beta above 1: the stock has amplified the market's moves (many technology stocks).
- Beta between 0 and 1: muted moves (many utilities and consumer staples).
- Beta near 0: no consistent relationship.
- Negative beta: tended to move against the market (rare for stocks; some hedges).
Beta is a measure of systematic risk, the part of a stock's movement explained by the market. A stock can be very volatile and still have a low beta if its moves are unrelated to the index.
The formula
Market beta: McDonald's against SPY
Using Finabase's daily closes for McDonald's (MCD) and the SPDR S&P 500 ETF (SPY) over the 250 trading days to October 29, 2026, the regression slope of McDonald's daily returns on SPY's is about 0.00, with a correlation of about 0.00 as well. Over that year McDonald's fell from $302.43 to $257.38 while SPY rose; its moves were driven by company and sector news, not by the market. That is unusually low even for a defensive stock, and a reminder that beta measured over one year can differ a lot from a long-run figure.
Finabase's BETA (5): a worked example on McDonald's
The chart study does something different. Here are McDonald's daily highs and lows for the five sessions ending October 29, 2026, as percentage changes from the previous bar.
| Date | High | % change in high (x) | Low | % change in low (y) |
|---|---|---|---|---|
| Oct 23, 2026 | $251.75 | −0.447 | $246.67 | +0.081 |
| Oct 26, 2026 | $252.88 | +0.449 | $247.98 | +0.531 |
| Oct 27, 2026 | $250.18 | −1.068 | $248.35 | +0.149 |
| Oct 28, 2026 | $252.39 | +0.883 | $248.00 | −0.141 |
| Oct 29, 2026 | $257.64 | +2.080 | $253.72 | +2.306 |
| Step | Calculation | Result |
|---|---|---|
| Σx, Σy | 1.898 and 2.927 | |
| Σx², Σxy | 6.648 and 4.716 | |
| Numerator | 5 × 4.716 − 1.898 × 2.927 | 18.025 |
| Denominator | 5 × 6.648 − 1.898² | 29.640 |
| BETA (5) | 18.025 ÷ 29.640 | 0.608 |
Finabase's chart shows 0.608. Read literally: over the last five sessions, McDonald's daily lows moved about 0.6% for each 1% move in its daily highs. Highs swung down and up while lows mostly edged higher, a narrowing range, until both jumped on October 29.
BETA (5) on a real chart: McDonald's 2025–2026
Over the year, McDonald's BETA (5) had a median of 0.69, was negative on 18 sessions and above 2 on 4. It peaked at 3.68 on June 16, 2026 and bottomed at −1.24 on September 29, 2026.
- A value near 1 means highs and lows moved together: the whole daily range shifted up or down in parallel.
- A value below 1 means lows moved less than highs: the range was widening on up days or narrowing on down days.
- A value above 1 means lows moved more than highs; negative values mean highs and lows moved in opposite directions, the range expanding or contracting from both ends.
With only five points, these slopes jump around a great deal, and a single unusual bar dominates the result.
How to use beta
Market beta for portfolio risk. A portfolio's beta is the weighted average of its holdings' betas. It estimates how the portfolio may react to a broad market move, which helps with diversification and hedging decisions.
Beta for position sizing. Some investors scale positions so that each contributes similar market risk: smaller positions in high-beta stocks.
Finabase's BETA (5) for range behaviour. The chart study is a niche tool. It can highlight days when a stock's range is expanding or contracting asymmetrically, but it is not a risk measure and should not be read as market beta.
Pitfalls and limitations
Beta is backward-looking. It describes the past relationship. McDonald's near-zero beta in 2026 says nothing certain about its behaviour in the next sell-off.
Period and frequency matter. Daily, weekly and monthly returns, and one-year versus five-year windows, give different betas for the same stock.
Low beta is not low risk. A stock can have a low beta and still be volatile; McDonald's fell about 15% over the year.
Five points are very few. Any 5-bar regression is fragile; that includes Finabase's BETA study.
Comparison table
| Measure | Compares | Window | Answers |
|---|---|---|---|
| Market beta | Stock returns vs index returns | 1–5 years | How much does it move with the market? |
| Correlation | Same pair | Same | How consistently do they move together? |
| Finabase BETA (5) | % change in lows vs highs | 5 bars | How is the daily range shifting? |
| ATR / NATR | One stock's own range | 14 bars | How large are its daily moves? |
See Correlation coefficient (CORREL): how two series move together and Average True Range (ATR): volatility, stops and position size.
How Finabase calculates and scores BETA
Finabase computes the BETA study with TA-Lib's BETA function, passing the bar's highs as the first series and its lows as the
second, a mapping inherited from the original Stock Master app. The default period is 5. It is drawn in its own panel.
BETA (5) appears in the technical gauge on the symbol page with its latest value and carries no Buy or Sell rule, so it always counts as neutral. For a stock's market beta, use the Beta column in the Screener, and the comparison tab to see how a stock has moved against SPY or another benchmark.
Frequently asked questions
What does a beta of 1.2 mean?
Historically the stock has moved about 1.2% for each 1% move in the market index, in the same direction on average. It is a statement about the past, not a guarantee.
Can beta be negative?
Yes. A negative beta means the asset tended to move against the market. It is rare for individual stocks over long periods; McDonald's 2026 beta was close to zero rather than negative.
Why does Finabase's BETA study not match the beta on other sites?
Because the chart study is not market beta. It regresses a stock's daily low changes on its daily high changes over five bars. Market beta compares the stock with an index over a much longer window.
Summary
Beta is a regression slope. As market beta, it measures how much a stock has moved with an index, McDonald's at about zero against SPY in the year to October 2026. Finabase's BETA chart study applies the same slope to a bar's highs and lows over five sessions, describing how the daily range is shifting rather than market risk. Know which one you are reading, and use the Screener's Beta for market sensitivity.
Sources and further reading
- William F. Sharpe, “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk,” Journal of Finance, vol. 19, no. 3 (1964)
- TA-Lib — BETA function reference
- Finabase chart data — MCD and SPY daily bars, 2025-10-30 to 2026-10-29, BETA computed by Finabase