WSJ's Two Low-Beta Stocks (Not)

Roger Nusbaum submits: There is an article in the Wall Street Journal called Safe Stocks which is a Smart Money (Magazine?) stock screen. The screen is looking for low-beta stocks that zig when the market zags.

Among the stocks listed are Zimmer Holdings (ZMH) and WellPoint (WLP). There is a table of stocks, and according to that table the beta for Zimmer is zero and for WellPoint it is 0.1.

I specifically did not want to look elsewhere for corroboration. This is more of a sniff test than number crunch. Look at the chart here and forget the table in the article. Do you think these stocks reduce volatility?

The point here is that even if the data from the table in the article is correct, your eyes may tell you something different.

Comments

[GeoffConsidine]

Roger:

Low Beta does not mean low volatility. Correlation is a measure that is independent of volatility. I will grant that if the screen is for 'safe' stocks then perhaps there is a problem here. The lesson, however, is that you need to look at numbers. These may reduce risks in someone's portfolio---but you would have to look at the portfolio in question.