For Astrakhan Power Sale Company Public Joint Stock Company’s (MISX:ASSB) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. ASSB is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Not all stocks are expose to the same level of market risk, and the broad market index represents a beta value of one. A stock with a beta greater than one is expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.

See our latest analysis for Astrakhan Power Sale Company

An interpretation of ASSB’s beta

Astrakhan Power Sale Company’s beta of 0.1 indicates that the stock value will be less variable compared to the whole stock market. This means that the change in ASSB’s value, whether it goes up or down, will be of a smaller degree than the change in value of the entire stock market index. ASSB’s beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns.

Could ASSB’s size and industry cause it to be more volatile?

ASSB, with its market capitalisation of RUРУБ331.23M, is a small-cap stock, which generally have higher beta than similar companies of larger size. However, ASSB operates in the electric utilities industry, which has commonly demonstrated muted reactions to market-wide shocks. As a result, we should expect a high beta for the small-cap ASSB but a low beta for the electric utilities industry. This is an interesting conclusion, since its size suggests ASSB should be more volatile than it actually is. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.

Can ASSB’s asset-composition point to a higher beta?

An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I examine ASSB’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, ASSB doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. As a result, the company may be less volatile relative to broad market movements, compared to a company of similar size but higher proportion of fixed assets. This is consistent with is current beta value which also indicates low volatility.