Suppose stock X has a beta of 2.5 and stock Y has a beta of 0.5. From this we can conclude that X has 1.0.
Investment risk is the idea that an investment will not perform as expected, that its actual return will deviate from the expected return. Risk is measured by the amount of volatility, that is, the difference between actual returns and average (expected) returns. Correlation is a statistical measure (expressed as a number) that describes the size and direction of a relationship between two or more variables.
If you invest $50,000 in Stock X and $50,000 in Stock Y, your portfolio will have a beta equal to 1.0.
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