<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Want to participate in a short research study? Help us shape the future of investment tools and get a chance to win a $ 250 gift card!"data-reactid =" 27 ">Do you want to participate in a short research study? Help us shape the future of investment tools and get a chance to win a $ 250 gift card!

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "If you own shares in Ardea Resources Limited (ASX: ARL), 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. Modern financial theory views volatility as a measure of risk. There are two main types of price volatility. The first category is company-specific volatility. This can be handled by limiting your exposure to a particular title. 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 in Ardea Resources Limited (ASX: ARL), then it's worth thinking about how it contributes to the volatility of your overall portfolio. beta is a measure of volatility Modern financial theory views volatility as a measure of risk, and there are two main types of price volatility: this category corresponds to the volatility specific to the company, limiting your exposure to a security The other type, which can not be diversified, is the volatility of the overall market.Every stock in the market is exposed to this volatility which is linked to the fact that stock prices are correlated in an efficient market. .

Some stocks closely mimic market volatility, while others have moderate, exaggerated or uncorrelated 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.

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

What does the beta value of ARL tell investors?

In fact, Ardea Resources has a beta of 1.08 over five years. This is close to 1, so the stock has always had a level of volatility similar to the market. Although history does not always repeat itself, this may indicate that the stock price will continue to be exposed to market risk, even if not excessively. 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 revenues and revenues of Ardea Resources in the image below.

ASX: Profit and Loss Account ARL Export 11 February 19

More

Does the size of ARL affect the expected beta?

Ardea Resources is a small company with a market capitalization of 54 million Australian dollars. Most companies of this size are not always actively traded. Companies of this size are generally more volatile than the market, whether or not this volatility is correlated. Therefore, it is a little surprising to see that this stock has a beta value so close to the global market.

What does this mean for you?

Ardea Resources has a beta value quite close to that of the overall market. It does not tell us much about it. It is therefore probably worth asking if the company is growing, if you are looking for stocks that will rise more than the market in general. The purpose of this article is to inform investors about beta values, but important corporate fundamentals such as the financial health and performance of Ardean Resources should also be considered. I urge you to continue your research by examining the following:

  1. Financial health: Are ARL'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. 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 =" 52 "> 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.