1
$\begingroup$

My risk model shows a Beta of 2 for the stock APTIV (maker of car components). The model looks at the past 3 years with no decay.

Total vol is high but specific vol is very low. Typically when this happens it is because of the leverage which magnifies returns. However in this instance the company does not seem to have much leverage.

What can explain a high sensitivity to the mark and low idiosyncratic risk for a company which is not levered more than others?

Thanks

Improve this question
$\endgroup$
1
  • 1
    $\begingroup$ The car industry is highly sensitive to the overall economy. $\endgroup$
    – noob2
    Apr 19 at 17:42
0
$\begingroup$

One of the explanations could be a business model with low diversification and a significant exposure to key suppliers, vendors, markets etc, typically manifested in highly volatile net revenue or EBITDA numbers. The fact that an operating entity is underlevered may signal that the management is not comfortable with taking on debt, or the lenders are not willing to underwrite it.

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.