Beta has no meaning until you name the benchmark. A stock can have a beta of 0.7 to the Nifty 50 and 1.3 to the Nifty IT index at the same time, and both numbers are correct. On saral.money the benchmark is whichever index or ETF you selected in the backtest config, and it is printed at the top of the comparison panel for exactly this reason.
How it is computed
beta = covariance(r_strategy, r_benchmark) / variance(r_benchmark)
Both series are point-to-point returns over the dates the strategy curve and the benchmark curve share. A beta of 1.2 says that when the benchmark moved 1%, your portfolio historically moved about 1.2% in the same direction, on average.
Reading the number
| Beta | Interpretation against the stated benchmark |
|---|---|
| Below 0 | Moves opposite the benchmark, typical of hedged or short books |
| 0 to 0.5 | Largely independent, or heavily in cash |
| 0.5 to 0.9 | Steadier than the index |
| Around 1.0 | Tracks the index closely in magnitude |
| 1.1 to 1.5 | Amplifies index moves, common in mid-cap and high-momentum books |
| Above 1.5 | Sharply geared to the index, both ways |
Caveats
Beta is not stable across regimes. A beta measured across 2021 and a beta measured across the March 2020 crash describe different worlds, and Indian equity correlations rise sharply in falling markets. The beta you measured in calm conditions is not the beta you will get in a drawdown.
Beta ignores fit. Two strategies can both report a beta of 1.0 while one tracks the benchmark tightly and the other barely relates to it. Read beta next to Tracking Error, which tells you how much of your behaviour the benchmark actually explains.
Cash produces beta mechanically. A strategy holding 40% cash prints a beta near 0.6 whether or not its stock selection is defensive. Check your average deployment before crediting a low beta to clever picking.
Sector concentration distorts it. A PSU-bank basket compared against the broad Nifty 50 will read as high beta simply because banks are a levered slice of the index, not because the strategy takes extra risk.