Traders' Roundtable

Correlation is standard function within Excel, but there is no standard approach on determining beta, and everyone is different.

I would like to know what difference is between beta and correlation on analysing the general direction as compared to the index.

If there is no right way to determine beta, can I simply use correlation instead?

Does anyone have any suggestions on which approach should be used?

Thanks in advance for any suggestions :>

"In finance, the beta (β) of a stock or portfolio is a number describing the correlated volatility of an asset in relation to the volatility of the benchmark that the asset is being compared to."
Source : http://en.wikipedia.org/wiki/Beta_(finance)

β < 0 Asset generally moves in the opposite direction as compared to the index
β = 0 Movement of the asset is uncorrelated with the movement of the benchmark
0 < β < 1 Movement of the asset is generally in the same direction as, but less than the movement of the benchmark
β = 1 Movement of the asset is generally in the same direction as, and about the same amount as the movement of the benchmark
β > 1 Movement of the asset is generally in the same direction as, but more than the movement of the benchmark

Try them all, then use the one whose performance pleases you the most.