If you are looking to invest in Kopran Limited’s (NSEI:KOPRAN), 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. The beta measures KOPRAN’s exposure to the wider market risk, which reflects changes in economic and political factors. Not every stock is exposed to the same level of market risk, and the market as a whole represents a beta value of one. Any stock with a beta of greater than one is considered more volatile than the market, and those with a beta less than one is generally less volatile.

Check out our latest analysis for Kopran

What does KOPRAN’s beta value mean?

Kopran’s beta of 0.58 indicates that the company is less volatile relative to the diversified market portfolio. 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. KOPRAN’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.

Does KOPRAN’s size and industry impact the expected beta?

KOPRAN, with its market capitalisation of ₹2.75B, is a small-cap stock, which generally have higher beta than similar companies of larger size. Conversely, the company operates in the pharmaceuticals industry, which has been found to have low sensitivity to market-wide shocks. As a result, we should expect a high beta for the small-cap KOPRAN but a low beta for the pharmaceuticals industry. This is an interesting conclusion, since its size suggests KOPRAN should be more volatile than it actually is. A potential driver of this variance can be a fundamental factor, which we will take a look at next.

Is KOPRAN’s cost structure indicative of a high 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 KOPRAN’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 a fixed to total assets ratio of over 30%, KOPRAN seems to be a company which invests a big chunk of its capital on assets that cannot be scaled down on short-notice. Thus, we can expect KOPRAN to be more volatile in the face of market movements, relative to its peers of similar size but with a lower proportion of fixed assets on their books. However, this is the opposite to what KOPRAN’s actual beta value suggests, which is lower stock volatility relative to the market.