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If you own shares in NV Bekaert AG (EBR: BEKB), it is useful to think about how this contributes to the volatility of your portfolio. In finance, beta is a measure of volatility. Modern financial theory views volatility as a measure of risk. There are two main types of price volatility. First, we have company-specific volatility, which is the price movement of a particular security. Holding at least 8 stocks can reduce this type of risk in a 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.

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. A stock with a beta greater than one is more sensitive to market movements than stocks with a beta below one.

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What the beta value of BEKB tells investors

Given that its beta is 0.87, we can assume that the share price of NV Bekaert has not been significantly impacted by the increased volatility of the market (over the last 5 years). This means that – if history is a guide – the purchase of the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, although sure). The beta is worth considering, but it is also important to determine whether NV Bekaert is increasing its revenues and revenues. You can take a look for yourself, below.

ENXTBR: Profit and Loss Account BEKB Export 9 February 19

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Does the size of the BEKB influence the expected beta?

NV Bekaert is a small-cap share with a market capitalization of 1.3 billion euros. Most companies of this size are actively traded. Small businesses may have a low beta value when firm-specific factors outweigh the influence of overall market volatility. This could happen here.

What does this mean for you?

NV Bekaert is generally not very sensitive to the wider market. This could be for various reasons. Typically, small businesses have a low beta if their stock price tends to fluctuate a lot due to specific developments. Alternatively, a strong dividend payer could move less than the market because investors value it for its revenue stream. To fully understand whether BEKB is a good investment for you, we also need to take into account important fundamental principles of the company, such as the financial health and performance of NV Bekaert. I strongly recommend that you dive deeper by considering the following points:

  1. Future prospects: What do well-informed industry analysts predict for BEKB's future growth? Check out our free research report on analyst consensus regarding BEKB's outlook.
  2. antecedents: Has the BEKB always performed well, regardless of the ups and downs of the market? Go into more detail in past performance reviews and take a look at the free visual representations of BEKB's history for more clarity.
  3. Other interesting actions: It is worth checking how BEKB compares to other companies in terms of valuation. 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 actions mentioned. 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 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.