There are several approaches to what you are asking, but all must be taken with a grain of salt as they what they are - just theoretical approaches to risk management. If you implement these techniques to your portfolio knowing the advantages and disadvantages of these techniques, you will be more successful in managing your portfolio, irrespective of what method you use.
The beta you suggest comes from the Capital Asset Pricing Model (CAPM). Basically, using regression analysis, it relates the movement of an equity to a particular market index (most often, this is the S&P 500 Index), over a given period of time. For example, if a stock ABC has a beta of 0.5 over the last two years relative to an index, then it can be expected that over the next two years, given the market follows a normal distribution (which is not necessarily the case), if the index goes up by 10 points, then the stock will go up by 5 points. Of course, the higher the beta, the greater the risk and therefore, the greater the return.
Be careful of using Beta's from websites such as Google/Yahoo. I am not sure of this, but, these websites normalize an index for all stocks, irrespective of which index it is traded on. In your case, GOOG's returns may be regressed on the returns of the S&P 500 index, when it actually trades on the NASDAQ market. Also, I do not think you can customize calculations over specific time periods on these websites. Therefore, it is best to get some data from YAHOO of these markets and pursue calculating them yourself.
Now, when calculating them, take into account a few things. First, which market is best to use? Nasdaq? Nyse? Russell? OR a weighted average of the returns of these markets? Second, which model to use? While the CAPM does present the most intuitive approach, it is the least realistic. Company fundamentals / technicals, index behaviors, etc..., also play a role in determining the the price behavior of a stock. If you are interested, check out the Fama and French model of Linear Asset Pricing. This model is more detailed in calculating beta of a stock relative to market return, and various index returns. A quick google of "Fama and French Factors model" should give you a good start.
Besides this, you can also use a little common sense. When investing in a stock of a company, understand what forces drive the stocks price. If you are investing in airline stocks, you can be sure that when oil prices rise, there will be a fall in airline stock prices. This fall will not be 1-to-1, but it will provide a good way to hedge risk. Get daily data on closing airline stock prices (BA for example) and get daily closing crude oil prices. Using this time series, seperate the data over whatever period you find best. In your case, if you invest, on average, over 5 days, then sort the data this way. Calculate the correlation coefficient over every 5 day period. If you really want to go crazy, you can use various statistical tests to test for whether or not these correlations are stable over time. But just by observing the numbers, you can get a relatively rough idea. If you see that the numbers do not change much, then it would be reasonable to assume that these correlations may continue in the future. If that is the case, then you can use this to hedge your risk to airline stocks.
You can also hedge equity risk using futures or other equity. In the case of hedging equity with equity, this is known as pairs trading. The essence here is that you find two stocks whose price behavior displays a negative relationship (for example, BA and CVX/XOM should have negative relationships) and hedge using the correlations. However, correlations between equities will most likely come out to be less stable over time, and therefore, there will be a greater amount of unpredictability in your results.
Hedging equity risk is much more complicated than hedging commodity risk, primarily because equities are so widely traded among many participants that the factors that affect their prices are infinitely large. Commodities however, rely more on fundamentals. Corn prices are affect a great deal by the weather. Thus, hedge funds use weather derivatives to hegde against commodity investments. But these techniques are reserved for the big boys. For your case, I would strongly suggest you to investigate factors which may have a large effect on a stocks price. Use the CAPM model above and the Fama and French model. Try to see whether there are differences in the calculated beta's. If there are differences, try to understand what factors might be forcing those differences to arise. Investigate changes in those beta's for each model over time. Are they stable? Are they volatile. If they are stable, then consider using them to determine your hedge ratio. If they are not stable, then find other factors and combine them to appropriately hedge your risk. You may get several stocks in your portfolio to hedge the risk of one stock.
Also, consider the use of an equity futures contract. Once again, get the data and crunch the numbers.
The amount of hedging you do is only limited by your imagination. But don't imagine too much. Overly hedging your portfolio (also known as curve fitting) can backfire and give you bad results.
As my econometrics professor always says:
KISS - Keep It Simple, Stupid.
Hope this helps,
Amit
