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If you own shares in Ansal Properties & Infrastructure Limited (NSE:ANSALAPI) then it’s worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all 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. 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 Ansal Properties & Infrastructure
What does ANSALAPI’s beta value mean to investors?
Zooming in on Ansal Properties & Infrastructure, we see it has a five year beta of 1.36. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market the market. If this beta value holds true in the future, Ansal Properties & Infrastructure shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it’s also important to consider whether Ansal Properties & Infrastructure is growing earnings and revenue. You can take a look for yourself, below.
Does ANSALAPI’s size influence the expected beta?
Ansal Properties & Infrastructure is a noticeably small company, with a market capitalisation of ₹1.77b. Most companies this size are not always actively traded. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.
What this means for you:
Since Ansal Properties & Infrastructure has a reasonably high beta, it’s worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether ANSALAPI is a good investment for you, we also need to consider important company-specific fundamentals such as Ansal Properties & Infrastructure’s financial health and performance track record. I highly recommend you dive deeper by considering the following: