If you own shares in Wonderful Sky Financial Group Holdings Limited HKG: then it s worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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. Beta can be a useful tool to understand how much a stock is influenced by market risk volatility. However, Warren Buffett said volatility is far from synonymous with risk in his letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
Check out our latest analysis for Wonderful Sky Financial Group Holdings
What we can learn from s beta value
Zooming in on Wonderful Sky Financial Group Holdings, we see it has a five year beta of .. This is above , so historically its share price has been influenced by the broader volatility of the stock market. Based on this history, investors should be aware that Wonderful Sky Financial Group Holdings are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it s also important to consider whether Wonderful Sky Financial Group Holdings is growing earnings and revenue. You can take a look for yourself, below.
SEHK: ome Statement, August th How does s size impact its beta?
With a market capitalisation of HK$.b, Wonderful Sky Financial Group Holdings 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 Wonderful Sky Financial Group Holdings 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 Wonderful Sky Financial Group Holdings’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
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.
If you spot an error that warrants correction, please contact the editor at editorial-teamsimplywallstm. 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. Thank you for reading.
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