If you are looking to invest in LiNiu Technology Group’s (NASDAQ:LINU), 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. Broadly speaking, there are two types of risk you should consider when investing in stocks such as LINU. The first risk to think about is company-specific, which can be diversified away by investing in other companies in order to lower your exposure to one particular stock. The other type of risk, which cannot be diversified away, is market risk. Every stock in the market is exposed to this risk, which arises from macroeconomic factors such as economic growth and geo-political tussles just to name a few.

Different characteristics of a stock expose it to various levels of market risk. A popular measure of market risk for a stock is its beta, and the market as a whole 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.

View our latest analysis for LiNiu Technology Group

An interpretation of LINU's beta

LiNiu Technology Group’s beta of 0.44 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.LINU’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 LINU's size and industry cause it to be more volatile?

With a market cap of USD $17.11M, LINU falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. In addition to size, LINU also operates in the consumer services industry, which has commonly demonstrated strong reactions to market-wide shocks. Therefore, investors may expect high beta associated with small companies, as well as those operating in the consumer services industry, relative to those more well-established firms in a more defensive industry. It seems as though there is an inconsistency in risks portrayed by LINU’s size and industry relative to its actual beta value. A potential driver of this variance can be a fundamental factor, which we will take a look at next.

How LINU's assets could affect its beta

During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta.I examine LINU’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint.Since LINU’s fixed assets are only 0.14% 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. Similarly, LINU’s beta value conveys the same message.