2020 Stock volatility (beta) of the major automakers

Source: BZM analysis based on S&P Capital IQ data.
Beta based on five years of monthly returns and MSCI World Index; monthly measurements from 31/12/2019 to 31/12/2020.

As BZM’s Insight No. 1 has highlighted, in 2020 Tesla’s capitalization rose from $78bn at the start of the year to almost $700bn at the end of December, a change of over 700%.

This strong growth was accompanied by high share price volatility, as can be seen from an analysis of its beta. Beta measures the degree to which the performance (i.e. the return) of a share deviates from that of the market in general: the greater the share’s variations compared to the market, the higher its beta and risk (shares that behave exactly like the market have a beta of 1). 

The graph shows the beta trend of the world’s major car manufacturers for capitalization from December 2019 to December 2020 (BZM calculations). At the beginning of the period, Tesla’s beta is among the lowest. This is also because, other things being equal, this parameter is higher in companies that are more heavily indebted, and Tesla, along with Ferrari, is the least indebted company in the sample (with almost no indebtedness at all). In 2020, as the share price soared, Tesla’s beta gradually increased and by the end of the year stood at 2.3, almost three times the value of twelve months earlier and well above the sample average.

The value of the Californian company is therefore currently more risky (or volatile) than that of more traditional car manufacturers.