Assets beta = Correlation of markets return * (Standard deviation of the asset / Standard deviation of market returns) = 0.7 * 10% / 14% = 0.5

Things to Remember

• Beta measures the sensitivity of an asset's returns to the market returns.
• A beta of 1 indicates that the asset's returns move in line with the market returns.
• A beta greater than 1 indicates that the asset is more volatile than the market.
• A beta less than 1 indicates that the asset is less volatile than the market.
• Correlation measures the strength and direction of a linear relationship between two variables.
• Standard deviation is a measure of the dispersion of a set of data points from its mean.