Portfolio Boss Documentation

Beta Index Filter



This filter looks at an instrument's Beta, whether it is above or below the threshold Beta value, to consider that instrument as a buy or sell.

Beta is a measure of an instrument's volatility (price instability) in relation to an index, and how strongly correlated that instrument is to the index. In short, it is a measure of an instrument's risk. It is measured by calculating the instrument's gain/loss during a certain period, compared with the index's gain/loss during the same period.

The Portfolio must be related to the index for the Beta to be meaningful. So, for example, calculating the Beta of an Oil ETF using the S&P 500 index would be an exercise in futility.

A Beta value less than 1 means the instrument is less volatile than the market (index), thus reducing your portfolio's risk (drawdown); but since it's less volatile, it may yield a smaller return than the index.

A Beta value of 1 means the instrument is perfectly in sync with the market; its volatility exactly follows the market. It can be a good or bad thing: good because the instrument doesn't add extra risks except that from the market condition; bad because it follows exactly the market's movement, which means you can't escape systematic risk from the market, if it's experiencing a downward spiral. As well, it may be bad because your return doesn't exceed that of the index.

A Beta value more than 1 means the instrument is more volatile than the market, thus riskier, but it comes with a possible higher return than the index.

This filter essentially tells Portfolio Boss to “look for instruments whose Beta for the past x days (or months) in relation to a certain index is above or below the threshold Beta value”.



1.  The first parameter defines how long to look for the Beta.




2.  The second parameter defines the index you want to compare against. 



You can click the little “chart” icon beside the index to show up that index's Price Chart (at the Instrument Tab). Note, you can't enter a delisted instrument here (those indicated by a number suffix inside square brackets). Otherwise a warning appears and you can't backtest the strategy:




3.  The third parameter defines whether the instrument's Beta must be “above” or “below” the threshold Beta value.




4.  The fourth parameter defines the threshold Beta value; usually set to 1. Which means you're looking for instruments whose Beta is “above” or “below” the value of 1.






If you're using this filter, the “Beta” indicator shows up below the instrument's Price Chart. This is the (selected) instrument's Beta against the index.






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