How Does Siyata Mobile Inc. (CVE:SIM) Affect Your Portfolio Volatility?

Simply Wall St

If you own shares in Siyata Mobile Inc. (CVE:SIM) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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 below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

See our latest analysis for Siyata Mobile

What does SIM's beta value mean to investors?

Zooming in on Siyata Mobile, we see it has a five year beta of 1.29. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, Siyata Mobile shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. 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 Siyata Mobile's revenue and earnings in the image below.

TSXV:SIM Income Statement April 4th 2020

How does SIM's size impact its beta?

With a market capitalisation of CA$22m, Siyata Mobile is a very small company by global standards. It is quite likely to be unknown to 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 Siyata Mobile 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 Siyata Mobile’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for SIM’s future growth? Take a look at our free research report of analyst consensus for SIM’s outlook.
  2. Past Track Record: Has SIM 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 SIM's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how SIM measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.