What is Beta?
A beta of 1.0 means a fund moves in lockstep with its benchmark. A beta of 0.6 means it typically moves about 60% as much - smoother in both up and down markets. Beta measures sensitivity to the market, not quality: a low-beta fund can still have zero skill, and a high-beta fund can still have real alpha.
β = Cov(Rp, Rm) / Var(Rm)
Beta is about sensitivity to the market, not skill - that’s what alpha measures separately.
Beta vs alpha, across 6 real funds
CHART
Beta vs Alpha - 6 real funds
Every fund here runs below-market beta (all under 1.0). Beta position alone doesn't predict alpha - the highest-alpha fund isn't the highest- or lowest-beta one.
Funds compared: Parag Parikh Flexi Cap · DSP Value · ICICI Prudential Value · SBI Focused · Parag Parikh ELSS Tax Saver · SBI Multicap
Reading the spread
Across these 6 funds, 3-year beta runs from 0.62 (Parag Parikh Flexi Cap) to 0.77 (SBI Multicap), a gap of 0.15. The middle value is 0.71, with 3 of 6 above it. Neither end is better or worse in itself; the number describes how a fund behaves, and what matters is whether that matches what you want.
How to use it in practice
Beta tells you how much a fund tends to move when its benchmark moves. A beta of 1 means it moves about as much as the market, below 1 means smaller swings, and above 1 means larger ones. Use it to size your risk: a fund with a beta of 1.2 will, on average, rise and fall more than the market, so it suits a longer horizon. A low-beta fund can be useful as a steadier part of a portfolio.
Common mistakes
Beta only captures sensitivity to the one benchmark used, so it is meaningful only when that benchmark is the right one. It is also not a measure of total risk: a fund can have a low beta and still be volatile for reasons unrelated to the market, such as concentrated stock picks. Read it together with R-squared, which tells you how much of the fund’s movement the benchmark explains at all.
Frequently asked questions
What does a beta of 1.2 mean?
It means the fund has tended to move 1.2 times as much as its benchmark: if the index rose 10%, the fund would be expected to rise about 12%, and fall about 12% when the index fell 10%.
Is a low beta fund always safer?
Not necessarily. A low beta means low sensitivity to the market, but the fund can still lose money from its own stock picks or concentration. Beta is one piece of the risk picture.
Which benchmark is beta measured against?
Against the fund’s own benchmark index. If the benchmark is a poor match for the fund, the beta is not very informative, which is why R-squared is shown alongside it.
WHAT THIS MEANS FOR YOU A low beta isn’t automatically “safer” in a way that matters, and a high beta isn’t automatically “riskier” in a way that costs you - check alpha and Sharpe Ratio alongside beta, never beta alone.
METHODOLOGY Beta and alpha both computed over a trailing 3-year window as of 2026-08-31, against each fund’s own benchmark. Data: Punji risk analytics. Not investment advice.