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How Does Public Joint Stock Company Aeroflot - Russian Airlines (MCX:AFLT) Affect Your Portfolio Volatility?

Simply Wall St

Anyone researching Public Joint Stock Company Aeroflot - Russian Airlines (MCX:AFLT) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know 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.

See our latest analysis for Aeroflot - Russian Airlines

What does AFLT's beta value mean to investors?

As it happens, Aeroflot - Russian Airlines has a five year beta of 1.02. This is fairly close to 1, so the stock has historically shown a somewhat similar level of volatility as the market. If the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. Beta is worth considering, but it's also important to consider whether Aeroflot - Russian Airlines is growing earnings and revenue. You can take a look for yourself, below.

MISX:AFLT Income Statement, September 3rd 2019

Could AFLT's size cause it to be more volatile?

Aeroflot - Russian Airlines is a small company, but not tiny and little known. It has a market capitalisation of RUруб115b, which means it would be on the radar of intstitutional investors. Small companies often have a high beta value because the stock price can move on relatively low capital flows. So it's interesting to note that this stock historically has a beta value quite close to one.

What this means for you:

Aeroflot - Russian Airlines has a beta value quite close to that of the overall market. That doesn't tell us much on its own, so it is probably worth considering whether the company is growing, if you're looking for stocks that will go up more than the overall market. In order to fully understand whether AFLT is a good investment for you, we also need to consider important company-specific fundamentals such as Aeroflot - Russian Airlines’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for AFLT’s future growth? Take a look at our free research report of analyst consensus for AFLT’s outlook.
  2. Past Track Record: Has AFLT been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of AFLT's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how AFLT measures up against other companies on valuation. You could start with this free list of prospective options.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.