Alpha and Beta
Two of the figures you will see doing research are the alpha and beta of a stock.
Alpha
The alpha tells you how well a stock has performed relative to the risk taken. An alpha less than 0 indicates that the investment performed below average for the risk taken. An alpha that is equal to 0 means that the investment return is on par with the risk taken. An alpha that is greater than 0 indicates an above average return for the risk taken.
The alpha is often used to judge the performance of fund managers. Managers that consistently get above 0 are considered better at finding companies that are a better risk.
Beta
The beta tells you the volatility of a stock. Highly volatile stocks swing up higher in good times and also lower in bad times. The more volatile the stock the more risky it is. A beta of 1 will generate the same volatility as the benchmark chosen. Many of the betas are benchmarked against the S&P 500. A beta above one indicates higher volatility than the market. A beta that is below one will have less volatility than the market. A negative beta means that the stock will perform the opposite of the market (stock will go up when market goes down). Beta can also be 0 and that means that the investment has no correlation with the benchmark index. It doesn't mean that there is no risk involved. There is always risk.
Summary
Alpha and beta are interesting to look at, but should not be used heavily. The most important things to look at is the business as a whole; earnings, growth, stability, and debt. You should value the company and look for value.
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