The formula for calculating beta is the covariance of the return of an asset with the return of the Market, divided by the variance of the return of the benchmark over a certain period.
Note that this is a “regression beta”. Generally, regression beta is not the ideal way of calculating the beta required for CAPM. This is because volatility in the past share price of just one company will have a major bearing on the beta. We need to get a forward looking beta. For this we will be taking an industry beta.
