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If you are looking to invest in Reinet Investments SC.A.’s (BDL:REINI), 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. REINI 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 broad market index represents a beta value 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 Reinet Investments S.C.A
What does REINI’s beta value mean?
With a five-year beta of 0.28, Reinet Investments S.C.A appears to be a less volatile company compared to the rest of the market. This means that the change in REINI’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. REINI’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.
Does REINI’s size and industry impact the expected beta?
A market capitalisation of €2.96B puts REINI in the basket of established companies, which is not a guarantee of low relative risk, though they do tend to experience a lower level of relative risk compared to smaller entities. Conversely, the company operates in the capital markets industry, which has been found to have high sensitivity to market-wide shocks. As a result, we should expect a low beta for the large-cap nature of REINI but a higher beta for the capital markets industry. It seems as though there is an inconsistency in risks from REINI’s size and industry.
How REINI’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 REINI’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Considering fixed assets is virtually non-existent in REINI’s operations, it has low dependency on fixed costs to generate revenue. 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, REINI’s beta value conveys the same message.