How to Compare Stock Market Portfolios

by Linda Richard

Your stock market portfolio includes all of your investments in the stock market. Diversified holdings balance your risks in different markets, although personal choices determine whether your investments are high risk or low risk. Comparing stock market portfolios requires beta accounting figures. The beta coefficient is the individual stock performance calculation compared with one of the stock market indexes such as Dow Jones Industrial Average or Standard and Poor's 500. You’ll need to calculate a weighted value for each stock to get a total value for comparing one portfolio against another.

Locate the beta calculations for a publicly traded stock on a finance website such as Yahoo Finance or MSN Money. Input the stock name or symbol to get a quote. Once you are on the page for the specific stock, look for key statistics or stock price history to find the beta calculation. You’ll need the current stock price and the beta value to compare stock portfolios.

Calculate the value of all of your shares in one company and multiply by the beta coefficient, the figure you got from the finance website. If you own 20 shares of stock in Company A valued at $17 a share and the beta is .75, multiply 20 by 17 by 0.75 for a beta value or weighted calculation of $255.

Make the same calculation for all stocks in your portfolio. For example, if you have 32 shares in Company B at $23 a share with a beta of 2.76, the weighted value is $2,031.36 or 32 times 23 times 2.76.

Add all the weighted calculations together to arrive at a total weighted portfolio value.

Compare one stock portfolio with another by comparing the total of weighted values. Add $255 and $2,031.36 if your portfolio has only the two different stocks. The weighted value of this portfolio is $2,286.36. Using beta calculations, your Company A stock is 11.15 percent of your total portfolio (divide 255 by 2,286.36) and your Company B stock makes up 88.85 percent.

Tips

  • The beta calculation on MSN Money is on the detailed quote page in the second column down. The same figure is on Yahoo Finance under key statistics.
  • The market representation for beta is 1. A beta higher than 1 shows that the stock fluctuates greater than the market. A beta of less than 1 reflects less fluctuation than the total stock market. Some analysts consider figures higher than 1 as high-risk and figures lower than 1 as low-risk. A beta of 0 is neutral -- your stock has not moved up or down over the time span of the calculation.

Warning

  • The beta calculation reflects past history and can't predict the future.

Items you will need

  • Calculator

About the Author

Linda Richard has been a legal writer and antiques appraiser for more than 25 years, and has been writing online for more than 12 years. Richard holds a bachelor's degree in English and business administration. She has operated a small business for more than 20 years. She and her husband enjoy remodeling old houses and are currently working on a 1970s home.

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