Glossary › Beta vs benchmark
Beta vs benchmark
How much the fund tends to move when the benchmark moves by 1% — a sensitivity, not a quality metric.
Formula
Beta = covariance(fund daily returns, benchmark daily returns) / variance(benchmark daily returns)
Intuition
Beta = 1.0 means the fund typically moves 1% when the benchmark moves 1%. Beta = 1.2 means it tends to amplify benchmark moves by 20%. Beta = 0.8 means it tends to dampen them. Beta says nothing about whether the fund is good — only about how it tracks.
What to look for
There is no good or bad beta. A high-beta fund is a leveraged play on the benchmark; a low-beta fund is more defensive. Match it to your own intent. Active funds in India often cluster between 0.85 and 1.05 vs their assigned benchmark.
Caveats
Beta is only meaningful against a benchmark the fund actually tracks closely (high R²). A small-cap fund's beta vs NIFTY 50 is not informative. Lens computes beta against the fund's assigned benchmark.