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PureBytes Links
Trading Reference Links
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Beta is a measure of a sotck's or a portfolio's volatility that is expressed
numerically as deviation from the market's volatility taken as unity. The
'market' beta is 1.00. If a stock/portfolio has a beta of 1.10, it may
appreciate 10% greater than the general market. If the beta is 0.95, it may
appreciate 5% less than the general market. In bull markets, you should
stick with high beta stocks because they will appreciate more, while in bear
markets, if you MUST buy something, you should buy low beta stocks because
they depreciate less than the overall market.
Alpha is a comparison of individual stocks in the same industry; i.e. Ford
vs. General Motors vs. Daimler Chrysler. In determining which stock in an
industry should outperform (underperform) the others, you should look towards
the stock with the highest (lowest) beta within that group. Alpha
essentially indicates that Ford (1.10) may outperform General Motors (1.05)
while GM may outperform Daimler Chrylser (1.00) -These are
arbitrarily-established numbers for simplicity...DO NOT REY ON THEM. In
mutual funds, alpha is the excess return usually attributed to a portfolio
manager's skill. High alpha funds indicate that the manager may have more
'skill' than one with a low beta.
Delta is a option term which I am not fully aware/sure of. Perhaps Dr.OEX
can explain it.
Please note the words "should" and "may." High alpha/beta stocks are NOT
assured of going up, while low alpha/beta stocks are NOT assured of going
down.
Enjoy the holidays,
Chris
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