Beta represents a key variable in terms of market sensitivity. If we were to compare the beta to the appropriate market index (i.e. S&P 500), we will see the relationship between market fluctuations and the individual beta of a stock.

For example, Stock B has a beta of 1.50. If the market portfolio increases by 10%, then Stock B would likely rise by 15%. What if the market decreases by 10%? Would the same fluctuation in Stock B's price occur? What if Stock B's beta was 1? How would the price of Stock B fluctuate if the market portfolio increased 5%?