Risk Measures
A stock with a beta of 1.2 relative to the S&P 500 would be expected to:
Beta > 1 = more volatile than market. Beta < 1 = less volatile. Negative beta = inverse.
Complete Analysis & Legal Rationale
A positive beta indicates the stock moves in the same direction as the market. A beta of 1.2 means the stock is 20% more volatile than the market - if the market rises 10%, the stock would be expected to rise 12%; if the market falls 10%, the stock would fall 12%.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Opposite movement would require a negative beta.
Matches the verified teaching point in the explanation.
A beta of 0 would indicate no correlation with market movements.
Higher beta means more volatility, not guaranteed outperformance.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.