What does a beta of 1.2 for an investment indicate?

A beta of 1.2 for an investment indicates that the investment is more volatile than the overall market. In this context, a beta of 1 signifies that the investment's price movements are in line with the market; a beta greater than 1, like 1.2, suggests that the investment typically moves 20% more than the market does. For example, if the market increases by 10%, the investment can be expected to increase by approximately 12%. Conversely, if the market decreases, this investment would likely decrease more sharply, demonstrating higher sensitivity to market fluctuations. This characteristic is indicative of higher risk associated with the investment when compared to the general market.