Negative Beta Stocks

What’s good folks??? I hope and trust you’ve had an amazing day. I want to welcome each of
you to “The Recap 101.” Tonight we are going to go through all of the details that you need to
know in regards to NEGATIVE BETA STOCKS. What they are, how to find them, what they do for
your portfolio, the risk reward, and how it correlates to the market today.
Let’s start from the beginning…lets discuss what volatility actually is. Volatility is the degree to
which a stock price can change. You often hear me talk about on here about what implied
volatility is well beta is another measurement of volatility but it further explores the change in
price as compared to the overall market. For us it’s the S&P 500 Index as we look to compare
that to these stocks #AMC #GME #TSLA #KOSS #NAKD #CTRM #NIO #NKD #GTII #OCGN and
many more. Basic Premise is the market always has a Beta of 1.0 and everything else builds on
that concept. So for example if a stock has a beta of 3.0 that means the stock grew overall by
30% more than the S&P 500 that grew only about 10% during the same period of time. To
calculate use the following equation
Beta = Covariance/Variance
Covariance in this case is the stocks return relative to the market and the Variance is the
measure of how the market moves to its mean value of 1.0.
What does covariance do for us? It refers how the stocks move together do they go up and
down at the same time or is it an inverse reaction where the stocks will move in the opposite
direction. Variance measures how far the market moves away from the mean of 1. How would I
be able to use this. Well beta helps to measure either the rise and fall of the stock within the
options market. So a beta that is greater than 1 is more volatile than the market. A beta that is
lower than 1 but greater than zero is to be considered less risky move with in the market. Okay
so I understand what beta can do is there anything else I should know? Well yeah…using beta is
a great way to measure short term risk but it is not a complete or a comprehensive measure of
risk. It’s sole movement is to measure the movement between the underlying stock and the
market median i.e. S&P500.
Okay so I get that beta means that but what is Negative Beta and why are folks talking about it
so much. Well a stock that has a negative beta within the market moves in the opposite
direction of the market median. So take GME for example the last I checked when writing this
article GME had a negative beta of 23% so this means for every 1 price of the market changes
GME is going to move overall by 23% of a change in the opposite direction. (Granted this
number could’ve changed since it was written so don’t behold me to it). Okay but how does this
work and why should I have one? Well Negative Beta stocks are good to have when the market
is doing pretty poorly. So think about it this way…Look at what happened to the overall market
today. GME is stayed mostly Green throughout the day finishing about 14 dollars above where
we closed on Monday. Now when we look at the market overall we’ll see that our median
which was the S&P 500 continued to drop for most of the day. The S&P 500 symbol is INX if you
want to look and compare it to $GME $AMC $TSLA $KOSS or any other stock #Holders. The
overall percent of change on the S&P 500 was -12.88% but what we saw was a move in the

opposite direction for $GME while we finished at 14 dollars above the close we saw highs of
about 204 with this particular stock. So this correlation tends to fluctuate all day depending
upon how our overall median market score goes up or down.
This is important to not as we get into a market that may not perform the way we want it to. So
what are the 7 Key takeaways:
1. Beta is another way for valuing risk in the options market.
2. Beta helps us understand how the underlying stock moves in tandem with the market
median or the S&P 500.
3. Beta helps us to figure out in the short term how risky a stock price might be and how it
would affect our portfolio.
4. Negative Beta moves in the opposite direction of the market. So If the market dives it
also moves in that direction. Now if the market tends to stay the same with less
movement we’ll also see that same change.
5. Negative beta stocks are risky in that when the overall market is doing well this tend to
lose more than the risk free rate.
6. When a negative beta stock is added to a portfolio is usually done to hedge other risk
within the market.
7. You can find it within your trading platform. Keep in mind that each platform may
calculate this amount differently so if you want the formula I can add it here but just
know that it’s there and I will do my best to post the updated beta information for these
stocks.
There is so much more to discuss about beta but I wanted you all to have this before we move
into tomorrow. Part 2 is coming and It will cover something new that occurred today. Part 3
Dark Pools. I will have to wait to post that after a meeting in the am as there is no time to do
that tonight and it to the post. Share what you know and I hope that helps. Explain what
negative beta stocks are, how they move with the market, and why many us hold beta stocks if
you have both AMC and GME.
Additionally, if you’re wondering why AMC didn’t move very much in the positive spectrum I
offer you this. According to Fidelity AMC has a better of -0.27 so that means for every 1%
change in the overall market median AMC will move 0.0027% of it’s price ratio. Some quick and
dirty math will show that we only moved about 0.5% from the overall total as the separation
from the market took place. Not bad but still has some improvement and ways to go in order
for AMC to take advantage of the overall downturn of the market.
I honestly hope this will help each of you understand the concept. If you have any questions.
Please post them and I’ll get to them as soon as I can. Take care all and part 2 on the news that
occurred today is coming next.