If you’re interested in Shougang Concord Grand (Group) Limited (

HKG:730

),matson's deli new windsor ny then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.

Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated 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. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

See our latest analysis for Shougang Concord Grand (Group)

What 730’s beta value tells investors

Looking at the last five years, Shougang Concord Grand (Group) has a beta of 1.09. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that Shougang Concord Grand (Group) shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. 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 Shougang Concord Grand (Group)’s revenue and earnings in the image below.

SEHK:730 Income Statement Export January 2nd 19

How does 730’s size impact its beta?

Shougang Concord Grand (Group) is a rather small company. It has a market capitalisation of HK$641m, which means it is probably under the radar of most investors. It has a relatively high beta, suggesting it is fairly actively traded for a company of its size. Because it takes less capital to move the share price of a small company like this, when a stock this size is actively traded it is quite often more sensitive to market volatility than similar large companies.

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What this means for you:

Beta only tells us that the Shougang Concord Grand (Group) share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there’s plenty more to learn. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Shougang Concord Grand (Group)’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

Financial Health

: Are 730’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our

financial health checks here

.

Past Track Record

: Has 730 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 730’s historicals

for more clarity.

Other High-Performing Stocks

: Are there other stocks that provide better prospects with proven track records? Explore our

free list of these great stocks here

.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at

[email protected]

.

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