Pandas How To Uncategorized How to calculate beta

# How to calculate beta

To calculate beta in pandas, you can use the cov method to compute the covariance of the returns of two assets, and the var method to compute the variance of one of the assets. Beta is defined as the covariance of the returns of an asset and the returns of a benchmark divided by the variance of the returns of the benchmark:

## Beta calculations

```import pandas as pd

returns = pd.DataFrame({'asset': [0.03, 0.02, -0.03, 0.04, 0.05],
'benchmark': [0.01, 0.02, 0.01, -0.02, 0.03]})

covariance = returns['asset'].cov(returns['benchmark'])
variance = returns['benchmark'].var()

beta = covariance / variance

print(f'Beta equals: {beta}')

```

You can also calculate beta using the OLS method from the statsmodels library:

```import statsmodels.api as sm

X = returns['benchmark']
y = returns['asset']

model = sm.OLS(y, X).fit()
beta = model.params

print(f'Beta equals: {beta}')

```

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