Measures of Portfolio Risk and How You Can Apply Them
by James B. Cloonan
While there may be better measures of risk than the ones in common use, if you are an individual investor you are really limited to popular measures if you want to be able to make useful comparisons.
In this article
- Standard Deviation
- Practical Applications
- Risk-adjusted returns
- Optimizing Return for Risk
- Average vs. the Indexes
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Beta, which is still used frequently, is a measure of volatility compared to the volatility of a market index—a beta of 1.0 indicates that the stock is equally as volatile as the market, while a beta greater than 1.0 indicates that the stock is more volatile and a beta less than 1.0 indicates that the stock is less volatile than the overall market.
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