In This Article:
Anyone researching Delta Corp Limited (NSE:DELTACORP) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.
Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Beta is a widely used metric to measure a stock’s exposure to market risk (volatility). Before we go on, it’s worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that ‘volatility is far from synonymous with risk.’ Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.
See our latest analysis for Delta
What does DELTACORP’s beta value mean to investors?
Given that it has a beta of 1.14, we can surmise that the Delta share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Delta are likely to rise strongly in times of greed, but sell off in times of fear. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Delta’s revenue and earnings in the image below.
Does DELTACORP’s size influence the expected beta?
With a market capitalisation of ₹71b, Delta is a small cap stock. However, it is big enough to catch the attention of professional investors. It’s not particularly surprising that it has a higher beta than the overall market. That’s because it takes less money to influence the share price of a smaller company, than a bigger company.
What this means for you:
Since Delta tends to moves up when the market is going up, and down when it’s going down, potential investors may wish to reflect on the overall market, when considering the stock. In order to fully understand whether DELTACORP is a good investment for you, we also need to consider important company-specific fundamentals such as Delta’s financial health and performance track record. I urge you to continue your research by taking a look at the following: