The Capital Asset Pricing Model (CAPM) is a foundational financial theory that estimates expected returns based on systematic market risk. Foretic integrates CAPM into our Bayesian Ensemble to provide risk-adjusted forecasts and beta calculations.
CAPM helps contextualize asset performance relative to the broader market, enabling better risk-adjusted decision making and portfolio allocation across all asset classes.
How CAPM works in finance markets
Calculate expected returns that account for systematic market risk. CAPM estimates returns using beta (volatility relative to market), helping assess whether assets compensate for their level of risk.
Measure how an asset's price movements correlate with market movements. Beta values help understand whether an asset is more or less volatile than the overall market, essential for portfolio construction.
Compare asset performance against market risk-adjusted expectations. CAPM provides a systematic framework to evaluate whether returns justify the level of systematic risk taken.
Estimate the expected return premium for taking market risk versus risk-free cash. This helps assess risk-adjusted opportunities and informs allocation decisions.
Contribute factor-aware predictions that consider market relationships. When integrated into our Bayesian Ensemble, CAPM adds systematic risk factor awareness to forecasts.
CAPM is used by hedge funds, quantitative desks, and risk management teams worldwide. Foretic makes this institutional methodology accessible through probabilistic forecasting.
Forecast Any Market
Access institutional-grade risk-adjusted forecasting with our CAPM model integration. Get beta calculations, expected return estimates, and benchmark comparisons for better decision-making.