Anyone researching TAS Tecnologia Avanzata dei Sistemi SpA (BIT:TAS) 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.
The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock.
The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated 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.
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.
What does TAS’s beta value mean to investors?
Given that it has a beta of 1.43, we can surmise that the TAS Tecnologia Avanzata dei Sistemi share price has been fairly sensitive to market volatility (over the last 5 years).
Based on this history, investors should be aware that TAS Tecnologia Avanzata dei Sistemi are likely to rise strongly in times of greed, but sell off in times of fear.
Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see TAS Tecnologia Avanzata dei Sistemi’s revenue and earnings in the image below.
How does TAS’s size impact its beta?
TAS Tecnologia Avanzata dei Sistemi is a noticeably small company, with a market capitalisation of €141.2m. Most companies this size are not always actively traded.
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:
Since TAS Tecnologia Avanzata dei Sistemi 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 TAS Tecnologia Avanzata dei Sistemi’s financial health and performance track record. I
highly recommend you dive deeper by considering the following:
- Financial Health: Are TAS’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 TAS 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 TAS’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 email@example.com.
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