high Beta<\/a> merely measures the magnitude of price movements; it does not guarantee price stability. Low Beta securities can still experience long-term downtrends, making it just one tool in an investor’s toolkit.<\/p>\nConventional wisdom suggests that lower Beta stocks underperform during market uptrends and outperform during downtrends, offering lower prospective returns in exchange for reduced risk. Yet, historical data challenges this notion.<\/p>\n
A study from Harvard Business School indicates that low Beta stocks not only avoid underperformance but actually outperform<\/em> the broader market across various conditions. Stocks in the lowest 30% of Beta scores have been shown to outperform those in the highest 30% by several percentage points annually.<\/p>\nThis outperformance can significantly impact long-term financial health, potentially determining the difference between a comfortable retirement and continued work. While low Beta stocks aren’t a cure-all, their compelling case for outperformance with reduced risk is noteworthy.<\/p>\n
How To Calculate Beta<\/strong><\/h3>\nCalculating a security\u2019s Beta is straightforward. The result, expressed as a number, indicates how closely the security moves with the benchmark. For instance, a Beta of 1.0 means the security moves in sync with the benchmark, while a Beta of 2.0 indicates double the volatility.<\/p>\n
Here\u2019s the formula:<\/p>\n
![\"Beta](\"https:\/\/www.suredividend.com\/wp-content\/uploads\/2018\/11\/Beta-Formula.png\"\/)
<\/p>\n
The numerator represents the covariance of the asset with the market, while the denominator is the market’s variance. These variables can be easily computed, especially in Excel.<\/p>\n
Beta can also be derived from the correlation coefficient of the security and the market, multiplied by the security\u2019s standard deviation divided by the market\u2019s standard deviation.<\/p>\n
To illustrate, let\u2019s assume a risk-free rate of 2%, a stock\u2019s return of 7%, and a benchmark return of 8%. Subtracting the risk-free rate from both yields 5% for the stock and 6% for the benchmark. Thus, the Beta is calculated as 5 divided by 6, resulting in a Beta of 0.83, indicating the asset is 83% as volatile as the benchmark.<\/p>\n
Beta & The Capital Asset Pricing Model (CAPM)<\/strong><\/h3>\nThe Capital Asset Pricing Model (CAPM) incorporates Beta to evaluate risk-adjusted returns. Without Beta, riskier securities might seem more attractive to investors, skewing the analysis.<\/p>\n
The CAPM formula is:<\/p>\n
![\"CAPM](\"https:\/\/www.suredividend.com\/wp-content\/uploads\/2018\/11\/CAPM-Formula.png\"\/)
<\/p>\n
Where the variables are defined as:<\/p>\n
\n- ERi = Expected return of investment<\/li>\n
- Rf = Risk-free rate<\/li>\n
- \u03b2i = Beta of the investment<\/li>\n
- ERm = Expected return of market<\/li>\n<\/ul>\n
In our example, the expected return for the security is calculated as follows:<\/p>\n
ER = 2% + 0.83(8% \u2013 2%)<\/p>\n
This results in an expected return of 6.98%, which may be acceptable depending on the investor’s objectives, given the lower volatility indicated by the Beta.<\/p>\n
Analysis On The Top 5 Low Beta Stocks<\/strong><\/h3>\nThe following five stocks have the lowest positive Beta values, listed in ascending order. All of them also provide dividends to shareholders:<\/p>\n
5. CME Group (GME)<\/strong><\/h3>\nCME Group operates futures and derivatives exchanges and has recently reported record revenue of $1.7 billion for Q2 2025, a 10% increase from the previous year.<\/p>\n
4. Southern Co. (SO)<\/strong><\/h3>\nSouthern Company serves approximately 9 million customers and has recently reported an 8% revenue growth, although earnings-per-share decreased due to higher operating costs.<\/p>\n
3. Kellanova (K)<\/strong><\/h3>\nKellanova, a major player in the food processing industry, reported mixed results for Q2 2025, with revenue slightly up but earnings-per-share falling short of estimates.<\/p>\n
2. UnitedHealth Group (UNH)<\/strong><\/h3>\nUnitedHealth, a healthcare giant, posted Q2 earnings that were below expectations, leading to a significant guidance cut for the remainder of the year.<\/p>\n
1. Conagra Foods (CAG)<\/strong><\/h3>\nConagra, known for its diverse food brands, reported a decline in net sales for Q4 2025, but remains committed to its growth strategy.<\/p>\n
Investors must consider risk when selecting investments. If two securities offer similar expected returns but one has a significantly lower Beta, the lower Beta option may provide better risk-adjusted returns. Utilizing Beta can help identify securities that may offer less volatility and enhance portfolio diversification.<\/p>\n
At Sure Dividend, we advocate for investing in companies with a strong likelihood of increasing dividends annually. If this strategy resonates with you, consider exploring our databases of dividend growth stocks.<\/p>\n
Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.<\/p>\n
![\"\"](\"https:\/\/www.suredividend.com\/wp-content\/uploads\/2022\/11\/100-Lowest-Beta-Stocks-In-The-SP-500-e1667689778760.png\"\/)