If you are looking to invest in Timeless Software Limited’s (SEHK:8028), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. 8028 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. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole represents a beta of one. A stock with a beta greater than one is considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.

See our latest analysis for Timeless Software

What does 8028’s beta value mean?

With a five-year beta of 0.61, Timeless Software appears to be a less volatile company compared to the rest of the market. The stock will exhibit muted movements in both the downside and upside, in response to changing economic conditions, whereas the general market may move by a lot more. 8028’s beta indicates it is a stock that investors may find valuable if they want to reduce the overall market risk exposure of their stock portfolio.

Could 8028’s size and industry cause it to be more volatile?

With a market cap of HKD HK$154.71M, 8028 falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Moreover, 8028’s industry, metals and mining, is considered to be cyclical, which means it is more volatile than the market over the economic cycle. As a result, we should expect a high beta for the small-cap 8028 but a low beta for the metals and mining industry. This is an interesting conclusion, since both 8028’s size and industry indicates the stock should have a higher beta than it currently has. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.

How 8028’s assets could affect its 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 test 8028’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Since 8028’s fixed assets are only 17.82% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. 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.