Find one company that has negative beta. Also, explain what does that negative beta say about...

Find one company that has negative beta. Also, explain what does that negative beta say about the risk of investment in that company?

Expert Solution

Post Holding Inc has a beta of -0.35.sIt is primarily involved in businesses like manufacturing and marketing of ready-to-eat cereals mainly in the U.S. and Canada.

A negative beta means that the stock will move in the opposite direction of the stock market.

A portfolio built to aggressively grow in value with little regard for risk should include stocks with betas greater than one. A negative beta stock would be out of place in that portfolio. However, a portfolio designed to mitigate risk and limit losses should have lower beta investments. Negative beta stocks could have a place in that portfolio.

It’s important to remember that a negative beta stock does have a relationship to the stock market. It moves in the opposite direction. In a falling market, the negative beta investments will provide a hedge because they will increase in value. However, in a rising market, the negative beta investments will fall in value and become a drag on the portfolio. Negative beta stocks can add value to a portfolio, but they do come with their own set of risks.

jeff jeffy answered 2 years ago

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