How to measure systematic risk of a stock?
"Beta is the correct answer.  It is THE measure of the risk relationship of a stock with the broad market. R squared is incorrect unless you mean something very odd by ""co-efficiency.""  A stock that goes up each time the market goes down has very low co-efficiency (negative risk as you have defined it) but very high R squared.  A stock that goes the same direction as the market but twice as far (with a lot of noise) has a very low R squared but contains a lot of market risk.  A stock that always goes in the same direction as the market but only a 100th as far is very safe but has a very high R squared. You can calculate beta using ""slope"" in excel or doing a regression, but the easiest thing is just to look up the beta in yahoo finance or elsewhere.  You don't need to calculate it for yourself normally."
Your hypothetical money market account parallel basically nails it.  You understand exactly how the math works.  IRR computes a rate at which your money market account would have to pay interest in order to match whatever investment you are comparing to. That said, there are two major complicating factors to consider: Your hypothetical account would have to not only pay interest, but also lend money, at exactly the IRR rate.  In reality of course, it never happens this way.  You may be able to lend (invest) at x, but to borrow you're going to have to pay y.  IRR simplifies away that issue in order to give us a single number.  That number can be very handy for comparison to other competing hypothetical investments, but it does not capture that fundamental issue of lending rate vs. borrowing rate. An IRR calculation assumes implicitly that all cash flows, outgoing and incoming, are known and fixed; that is, risk-free.  It makes no allowance whatever for risk, and all investments have some level of risk.  Two investments that compute to the same IRR might have hugely different risk around their cashflows, and so not be a close decision at all.  To compare those investments, you might go to a measure like RAROC-- risk-adjusted return on capital.  But that's much harder, and more subjective, because it requires some numerical measurement of risk. "Just to be clear to start, beta is a statistical property.  So if your beta is 0.8 over a period of time.  Stock X moved on average 0.8 for a point move in the index. We might hope this property is persistent and it seems to be fairly persistent (predictable) but it doesn't have to be. Also it is important to note this is not a lag in time.  Beta is a measure of the average size of a move in the stock at the same time as a move in the index.  In your example both the stock and index are measured at end of day.  You can say that the stock ""lags"" behind the index because it doesn't grow as quickly as the market when the market is growing, but this is not a lag in time just a lag in magnitude.   People do occasionally calculate betas between a stock and lagged in time market prices, but this is not the commonly used meaning of beta.  This might actually be a more useful measure as then you could bet on the future of the stock given what happened today in the market, but these ""betas"" tend to be much more unstable than the synchronized version and hard to trade on. When you calculated beta you choose a time scale, in this case daily.  So if your calculation is on a day-to-day basis then you have only tested the relationship on a day-to-day basis not, for instance, on a week-to-week basis.  Now day-to-day and week-to-week betas are often related and are generally reasonably close but they do not have to be.  There can be longer term effects only picked up on the longer scale.   Stock X could day-to-day with a (average) beta of 1 to the stock market, but could have even a negative beta year-to-year with the market if the stock is counter-cyclical to longer scale trends on the market.  So beta can change with the time scale used in the calculation." Not all debt is bad. If it carries a reasonable interest rate, you don't need to clear it immediately. As for investing in an index fund, they're an affordable, easy way to spread your money over various assets. However, asset allocation is just one of many investment strategies. Ideally, you want to invest according to your goals, tax situation, and risk tolerance. You want a portfolio that dynamically allocates to various investment strategies, both beta and alpha, according to changing market conditions. Most importantly, you want systematic risk management for every aspect of your investments. There is a measure of protection for investors. It is not the level of protection provided by FDIC or NCUA but it does exist: Securities Investor Protection Corporation What SIPC Protects SIPC protects against the loss of cash and securities – such as stocks   and bonds – held by a customer at a financially-troubled SIPC-member   brokerage firm. The limit of SIPC protection is $500,000, which   includes a $250,000 limit for cash. Most customers of failed brokerage   firms when assets are missing from customer accounts are protected.   There is no requirement that a customer reside in or be a citizen of   the United States. A non-U.S. citizen with an account at a brokerage   firm that is a member of SIPC is treated the same as a resident or   citizen of the United States with an account at a brokerage firm that   is a member of SIPC. SIPC protection is limited. SIPC only protects the custody function of   the broker dealer, which means that SIPC works to restore to customers   their securities and cash that are in their accounts when the   brokerage firm liquidation begins. SIPC does not protect against the decline in value of your securities.   SIPC does not protect individuals who are sold worthless stocks and   other securities. SIPC does not protect claims against a broker for   bad investment advice, or for recommending inappropriate investments. It is important to recognize that SIPC protection is not the same as   protection for your cash at a Federal Deposit Insurance Corporation   (FDIC) insured banking institution because SIPC does not protect the   value of any security. Investments in the stock market are subject to fluctuations in market   value. SIPC was not created to protect these risks. That is why SIPC   does not bail out investors when the value of their stocks, bonds and   other investment falls for any reason. Instead, in a liquidation, SIPC   replaces the missing stocks and other securities when it is possible   to do so. About 10 years ago, I used to use MetaStock Trader which was a very sound tool, with a large number of indicators, but it has been a number of years since I have used it, so my comments on it will be out of date. At the time it relied upon me purchasing trading data myself, which is why I switched to Incredible Charts. I currently use Incredible Charts which I have done for a number of years, initially on the free adware service, now on the $10/year for EOD data access. There are quicker levels of data access, which might suit you, but I can't comment on these. It is web-based which is key for me. The data quality is very good and the number of inbuilt indicators is excellent. You can build search routines on the basis of specific indicators which is very effective. I'm looking at VectorVest, as a replacement for (or in addition to) Incredible Charts, as it has very powerful backtesting routines and the ability to run test portfolios with specific buy/sell criteria that can simulate and backtest a number of trading scenarios at the same time. The advantage of all of these is they are not tied to a particular broker. "Almost every online datasources provide historical prices on given company / index's performance; from this, you can easily calculate ""standard deviation"" by yourself. With that said, standard deviation presumes a fixed set of data. Most public corporations have data spanning multiple decades, during which a number of things have changed: For these reasons, I have doubts on simplistic measures, such as ""standard deviation"" measuring any reality on the underlying vehicle. Professional investors usually tend to more time-point data, such as P/E ratio." "FRM, but IIRC ""Risk"" is more of a reporting role in most banks nowadays.  Meaning you automate some tools that generate reports, and your job is to make sure the results are numerically consistent with industry standard (read: wrong) methodology, and capital rules.  Learn how to calculate VaR 20 different ways, some less useless than others, however mostly fundamentally useless.   Expected shortfall, so basically if there is a VaR break what is the expected loss (also useless!) as you will either by simulating based on some distribution that hopefully fits the data, or historical data which is supposed to repeat itself.   So to do this fun stuff: You're gonna need to know stochastic calculus (not necessarily but you should understand intuitively the formulas you're using), statistics (hypothesis testing), some econometrics/time series analysis, but key thing is programming." Mostly, when an equity's price rises, its statistical and implied volatilities fall and vice versa. The reason why is a mathematical phenomenon mixed with the reality that a unceasingly falling asset price will soon not exist, skewing the results with survivorship bias.   Since volatility is standard deviation of price indexes, a security that changes in price by the same amount every day will have lower volatility, so a rising price will have lower implied volatility because its mostly experiencing positive daily price change while a recently falling price will have higher volatility because factored together with the positive price changes, the negative price changes will widen the standard deviation of the securities price index. Quantitatively, any change, in or out of one's favor, is a risk because change is uncertain, and any uncertainty is a risk. This quantitative interpretation while valid runs almost totally counter to the value opinion, that a lower price relative to value is a lower risk than a higher price relative to value, but both have their place in time. Over long time periods, it's best to use the value interpretation, quantitative for shorter.  Using the opposite has hastily destroyed many a fund manager.