Beta is always measured in respect to some benchmark. This means that investors are assumed by the CAPM to want a return on an investment based on its systematic risk alone, rather than on its total risk. Adding a stock to a portfolio with a beta of 1.
A beta can be zero simply because the correlation between that item's returns and the market's returns is zero. While we calculate beta, we take into account historical data — 1 year, 2 years or 5 years etc.
For example, if a stock's beta is 1. The equity risk premium Rather than finding the average return on the capital market, E rmresearch has concentrated on finding an appropriate value for E rm — Rfwhich is the difference between the average return on the capital market and the risk-free rate of return.
The yield on treasury bills sometimes called the yield to maturity is the cost of debt of the treasury bills. Though in the above cases we saw that Beta was greater than zero, however, there may be stocks that have negative betas.