How does investing in Zenith Minerals Limited (ASX: ZNC) affect the volatility of your portfolio?

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<p class = "canvas-atom-canvas-text MB (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "If you own shares in Zenith Minerals Limited (ASX: ZNC), it is useful to think about how it contributes to the volatility of your portfolio as a whole. 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 type is company-specific volatility. Investors use uncorrelated equity diversification to reduce this type of price volatility across the entire portfolio. The other type, which can not be diversified, is the volatility of the entire market. Each market share is exposed to this volatility, linked to the fact that stock prices are correlated in an efficient market. "Data-reactid =" 28 "> If you own shares of Zenith Minerals Limited (ASX: ZNC), then In the financial sector, beta is a measure of volatility Volatility is considered a measure of risk in theory Investors may think that volatility is divided in two The first type is company-specific volatility, with investors using uncorrelated equity diversification to reduce this type of price volatility across the board. portfolio, the other type, which can not be diversified, is the volatility of the entire market, is exposed to this volatility, linked to the fact that stock prices are correlated in an efficient market.

Some stocks see their prices evolve in concert with the market. Others tend toward stronger, softer or unrelated price movements. Beta is a widely used measure of a stock's exposure to market risk (volatility). Before proceeding, it should be noted that Warren Buffett pointed out in his 2014 letter to shareholders that "volatility is far from being risky". That said, beta can still be quite useful. The first thing to understand about beta is that market beta is one of them. Any stock with a beta greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or weakly correlated with the market.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Discover our latest analyzes for Zenith Minerals "data-reactid =" 30 "> Check out our latest Zenith Minerals analysis

What does the ZNC beta value mean for investors?

Given that its beta is 1.09, we can assume that the Zenith Minerals share price has been quite sensitive to market volatility (over the past 5 years). If this beta value holds true in the future, Zenith Minerals shares should increase more than the market as the market rises, but fall more rapidly when the market declines. Share price volatility needs to be examined, but most long-term investors believe that the historical income and earnings growth are greater. Take a look at Zenith Minerals prices in this regard, below.

ASX: Profit and Loss Account ZNC Export February 1, 19

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Does the size of ZNC influence the expected beta?

Zenith Minerals is a rather small company. It has a market capitalization of 13 million Australian dollars, which means it's probably under the radar of most investors. Its beta is relatively high, suggesting that it is fairly actively traded for a company of this size. Since it takes less capital to move the stock price of a small company like this, when a stock of this size is actively traded, it is often more sensitive to market volatility than larger ones. similar companies.

What does this mean for you?

Given that Zenith Minerals tends to increase when the market is rising and falling when it falls, potential investors may wish to think about the market as a whole, when considering acquiring shares. To fully understand if ZNC is a good investment for you, we also need to consider important company-specific fundamentals, such as the financial health and performance of Zenith Minerals. I strongly recommend that you dive deeper by considering the following points:

  1. Financial health: Are ZNC's activities financially viable? Balance sheets can be difficult to analyze, which is why we have done it for you. Check out our financial health check here.
  2. antecedents: Has ZNC always performed independently of the highs and lows of the market? Go into more detail in past performance reviews and review free visual representations of ZNC histories for clarity.
  3. Other performing stocks: Are there other stocks offering better prospects with proven track records? Explore our free list of these large stocks here.

<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 actions mentioned. For errors that need to be corrected, please contact the publisher at the address 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 based solely on fundamental data. account of the latest price sensitive business announcements.

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