Beta is a common measure of volatility, or systematic risk, of a security or portfolio, compared to the broader marketplace. A beta reading above 1 indicates that the security is more volatile than broader equities market, whereas a beta of less than 1 corresponds to lower volatility. Potential investors should know that a higher beta may generate greater returns at greater risks while low-beta securities are considered a more conservative play.
Investors who want to capture a rally in cyclical sector stocks can also take a look at the PowerShares S&P 500 High Beta Portolio (NYSEArca: SPHB). The high-beta portfolio is the opposite play to the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV). SPHB takes 100 S&P 500 index stocks that have exhibited the highest sensitivity to market movements, or beta, over the past 12 months and includes a heavy tilt toward tech 20.3%, financials 20.1%, consumer discretionary 19.7% and industrials 17.5%, with zero exposure to utilities. [Have it Both Ways With Volatility ETFs]
Over the past month, SPHB has increased 1.9%, whereas SPLV rose 0.8%.
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Max Chen contributed to this article.