How AS Roma SPA (BIT:ASR) Can Impact Your Portfolio Volatility
If you’re interested in AS Roma SPA (BIT:ASR), 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. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient 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. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.
Check out our latest analysis for A.S. Roma
What we can learn from ASR’s beta value
Given that it has a beta of 1.87, we can surmise that the A.S. Roma share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that A.S. Roma shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it’s also important to consider whether A.S. Roma is growing earnings and revenue. You can take a look for yourself, below.
Could ASR’s size cause it to be more volatile?
A.S. Roma is a rather small company. It has a market capitalisation of €311m, which means it is probably under the radar of most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.
What this means for you:
Beta only tells us that the A.S. Roma share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there’s plenty more to learn. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as A.S. Roma’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Financial Health: Are ASR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Past Track Record: Has ASR 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 ASR’s historicals for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
