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If you're interested in SIL Investments Limited (NSE:SILINV), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
View our latest analysis for SIL Investments
What does SILINV's beta value mean to investors?
Given that it has a beta of 1.15, we can surmise that the SIL Investments share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that SIL Investments are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it's also important to consider whether SIL Investments is growing earnings and revenue. You can take a look for yourself, below.
Does SILINV's size influence the expected beta?
SIL Investments is a rather small company. It has a market capitalisation of ₹1.7b, which means it is probably under the radar of most investors. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.
What this means for you:
Since SIL Investments 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. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as SIL Investments’s financial health and performance track record. I urge you to continue your research by taking a look at the following: