If you own shares of PHI, Inc. (NASDAQ: PHII), it is helpful to think about how this contributes to the volatility of your portfolio. In finance, beta is a measure of volatility. Volatility is considered a measure of risk in modern financial theory. Investors may think that volatility is divided into two main categories. The first category is the volatility specific to the company. This can be handled by limiting your exposure to a particular title. The second type is the broader volatility of the market, which can not be diversified because it stems from macroeconomic factors that directly affect all stocks in the market.

Some stocks see their prices move along with the market. Others tend toward stronger, softer or unrelated price movements. Some investors use beta to measure the impact of market risk (volatility) on a given stock. We must keep in mind that Warren Buffett warned that "volatility is far from risk," but the beta remains a useful factor to consider. To make good use of it, you must first know that the beta of the market is one. A stock with a beta greater than one is more sensitive to market movements than stocks with a beta below one.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " See our latest analysis for PHI "data-reactid =" 29 "> See our latest analysis for PHI

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Want to help shape the future of tools and investment platforms? Take the survey and participate in one of the most advanced studies of stock market investors to date."data-reactid =" 30 ">Want to help shape the future of tools and investment platforms? Take the survey and participate in one of the most advanced studies of stock market investors to date.

What does the beta value of PHII mean for investors?

With a beta of 1.08 (which is pretty close to 1), the price of PHI shares has always been about as volatile as the broader market. If the future looks like the past, we could therefore consider it likely that the share price will experience a volatility of the share price similar to that of the global market. Many would argue that beta is useful for sizing positions, but that fundamental measures such as income and profits are more important in general. You can see the income and earnings of PHI in the image below.

NasdaqGS: PHII Export Profit and Loss Account 11 January 19

More

Does the size of PHII affect the expected beta?

With a market capitalization of US $ 35 million, PHI is a very small company by world standards. It is very likely that it is unknown to most investors. Companies of this size are generally more volatile than the market, whether or not this volatility is correlated. Therefore, it is a little surprising that this stock has a beta value so close to the global market.

What does this mean for you?

It is likely that there is a link between the price of PHI's action and the broader market because its beta value is close enough to one. However, long-term investors are generally well served by examining past market volatility and focusing on the underlying development of the company. If this is your game, measures such as income, profits and cash flow will be more useful. In order to fully understand if the PHII is a good investment for you, we also need to consider important fundamental principles of the company, such as PHI's financial health and track record. I strongly recommend that you dive deeper by considering the following points:

  1. Future prospects: What do well-informed industry analysts predict for PHII's future growth? Take a look at our free research report on analyst consensus on PHII's outlook.
  2. antecedents: Has the PHII always performed independently of the highs and lows of the market? Go into more detail in the past performance analysis and take a look at the free visual representations of the PHII histories for clarity.
  3. Other interesting actions: It should be checked how PHII compares to other companies in terms of evaluation. You can start with this free list of potential options.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To help readers understand the past volatility of the financial market in the short term, our goal is to provide you with a long-term research analysis based solely on fundamental data. Note that our analysis does not take into account the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the mentioned actions. For errors that need to be corrected, please contact the publisher at editorial-team@simplywallst.com.

"data-reactid =" 53 "> To help readers understand the short-term volatility of the financial market, we aim to provide you with a long-term research analysis focusing on fundamental data only. ignores the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the mentioned actions. For errors that need to be corrected, please contact the publisher at editorial-team@simplywallst.com.