# Correlation and Beta Calculator

> Free correlation and beta calculator. Paste two lists of returns to get correlation, beta, alpha per period and R squared for a stock, fund or strategy.

Source: https://learn.tradelabsai.com/tools/correlation-and-beta-calculator/  
Track: Calculators · Level: Beginner · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Correlation and Beta Calculator", https://learn.tradelabsai.com/tools/correlation-and-beta-calculator/

How closely does a stock follow the market? How much would a 1% market move change your portfolio? Would adding this asset diversify you or just add more of the same risk? Correlation and beta answer these questions. Correlation measures how consistently two series move together, from minus 1 to plus 1. Beta measures how much one moves for each 1% move in the other. Paste matching lists of returns for a benchmark and an asset, and this calculator gives correlation, beta, alpha and R squared.

## Calculator

*Interactive calculator: use it at https://learn.tradelabsai.com/tools/correlation-and-beta-calculator/*

## How it works

```
Correlation = Covariance(asset, benchmark) / (SD(asset) × SD(benchmark))
Beta = Covariance(asset, benchmark) / Variance(benchmark)
Alpha per period = Mean asset return - Beta × Mean benchmark return
R squared = Correlation²
```

Alpha here is a simple regression intercept without subtracting a risk free rate, so treat it as a rough figure. If the lists differ in length, only the matching pairs from the start are used. See [Covariance and Correlation](https://learn.tradelabsai.com/math/covariance-and-correlation/) and [Alpha and Beta](https://learn.tradelabsai.com/portfolio/alpha-and-beta/).

**Example: A high beta stock**
Using the sample data of eight periods, the correlation is about 0.99, meaning the stock moves almost in lockstep with the benchmark. Beta is about 1.42: when the benchmark rises 1%, the stock tends to rise about 1.4%, and falls about 1.4% when it falls 1%. R squared of about 0.99 says the benchmark explains nearly all of the stock's movement. Alpha is close to zero, about minus 0.1% per period. To hedge $10,000 of this stock, you would short about $14,200 of the benchmark. See [Hedging](https://learn.tradelabsai.com/markets/hedging/).

## Reading correlation

| Correlation | Meaning |
|---|---|
| 0.8 to 1.0 | Move together strongly; little diversification |
| 0.3 to 0.8 | Moderate relationship |
| minus 0.3 to 0.3 | Weak or no linear relationship; good diversifier |
| Below minus 0.3 | Tend to move in opposite directions; natural hedge |

## Reading beta

| Beta | Meaning |
|---|---|
| Above 1 | Amplifies the benchmark's moves |
| About 1 | Moves like the benchmark |
| 0 to 1 | Dampened moves |
| About 0 | Little market sensitivity |
| Negative | Tends to move opposite |

Beta and correlation are related but different. A stock can have low correlation but high beta if it is very volatile, or high correlation but low beta if it is calm. See [R-Squared](https://learn.tradelabsai.com/portfolio/r-squared/).

## Getting good results

1. **Use returns, not prices;** prices trend and produce misleading correlations. See [Stationarity, Differencing and Unit Roots](https://learn.tradelabsai.com/math/stationarity/).
2. **Match the periods** exactly: same dates, same order.
3. **Use enough data:** at least 30 observations, ideally more, such as two to five years of weekly or monthly returns.
4. **Choose the right benchmark:** a technology stock against a technology index, a small company against a small cap index.
5. **Check stability:** correlations and betas change, and they often rise in crises. See [Correlation Management](https://learn.tradelabsai.com/portfolio/correlation-management/).

## Uses

| Use | How |
|---|---|
| Diversification | Add assets with low correlation to your portfolio. See [Diversification](https://learn.tradelabsai.com/portfolio/diversification/) |
| Hedging | Use beta to size an index hedge |
| Position sizing | Size correlated positions smaller. See [Correlation-Adjusted Sizing](https://learn.tradelabsai.com/risk/correlation-adjusted-sizing/) |
| Performance review | Check whether returns are just market exposure. See [Information Ratio and Tracking Error](https://learn.tradelabsai.com/portfolio/information-ratio/) |

## Where to find return data

Download daily, weekly or monthly closing prices for both series from your charting platform or a data provider, then convert them to percentage changes over the same dates before pasting them in.

## Frequently asked questions

### What is the difference between correlation and beta?

Correlation measures how consistently two series move together; beta measures how large one series' moves are relative to the other's.

### How many data points do I need for beta?

At least about 30 is a reasonable minimum, and more gives more reliable estimates, though very old data may no longer be relevant.

### Can correlation change over time?

Yes. Correlations shift with market conditions and often rise sharply during crises.

Next, estimate potential losses with the [Portfolio Volatility and VaR Calculator](https://learn.tradelabsai.com/tools/var-calculator/).

## Continue learning

- Next lesson: [Portfolio Volatility and VaR Calculator](https://learn.tradelabsai.com/tools/var-calculator/)
- Previous lesson: [Kelly Criterion Calculator](https://learn.tradelabsai.com/tools/kelly-criterion-calculator/)
- Related: [Kelly Criterion Calculator](https://learn.tradelabsai.com/tools/kelly-criterion-calculator/): Free Kelly criterion calculator. Enter your win probability and payoff ratio to find the full Kelly fraction, a safer fractional Kelly and expected growth.
- Related: [Covariance and Correlation](https://learn.tradelabsai.com/math/covariance-and-correlation/): Covariance and correlation measure how two assets move together. Learn the formulas, how to read them, why correlations change in crises and their portfolio role.
- Related: [Alpha and Beta](https://learn.tradelabsai.com/portfolio/alpha-and-beta/): Beta measures how much a portfolio moves with the market; alpha is the return beyond what that exposure explains. Learn formulas, CAPM, regression and pitfalls.
- Related: [R-Squared](https://learn.tradelabsai.com/portfolio/r-squared/): R squared shows how much of a portfolio's movement is explained by its benchmark or a model. Learn what it means, how to read it with beta and alpha, and its traps.
- Related: [Correlation Management](https://learn.tradelabsai.com/portfolio/correlation-management/): Correlation management keeps a portfolio from turning into one big bet. Learn to measure correlations, combine correlated risks and set sensible limits.
- Related: [Hedging](https://learn.tradelabsai.com/markets/hedging/): Hedging means taking a position that offsets the risk of another. Learn how hedges work with options, futures and correlated assets, their costs and limits.