If you own shares in Zodiac-JRD-MKJ Limited (NSE:ZODJRDMKJ) then it’s worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks are more sensitive to general market forces than others. 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. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
Check out our latest analysis for Zodiac-JRD-MKJ
What does ZODJRDMKJ’s beta value mean to investors?
Zooming in on Zodiac-JRD-MKJ, we see it has a five year beta of 0.84. This is below 1, so historically its share price has been rather independent from the market. This suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio’s weighted average beta is higher than 0.84. Beta is worth considering, but it’s also important to consider whether Zodiac-JRD-MKJ is growing earnings and revenue. You can take a look for yourself, below.
How does ZODJRDMKJ’s size impact its beta?
Zodiac-JRD-MKJ is a noticeably small company, with a market capitalisation of ₹222m. Most companies this size are not always actively traded. Very small companies often have a low beta value because their share prices are not well correlated with market volatility. This could be because the price is reacting to company specific events. Alternatively, the shares may not be actively traded.
What this means for you:
The Zodiac-JRD-MKJ doesn’t usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. In order to fully understand whether ZODJRDMKJ is a good investment for you, we also need to consider important company-specific fundamentals such as Zodiac-JRD-MKJ’s financial health and performance track record. I highly recommend you dive deeper by considering the following: