What does its beta value mean for your wallet?

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If you own shares of Nordic Shipholding A / S (CPH: NORDIC), you need 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 closely mimic market volatility, while others have moderate, exaggerated or uncorrelated 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.

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What does the NORDIC beta value mean to investors?

Nordic Shipholding has a five-year beta of 1. It is reasonably close to the market beta of 1, so stocks have already exhibited volatility levels similar to those of the market. Using history as a guide, it can be assumed that the stock price will likely be influenced by market volatility, but it is unlikely to be particularly sensitive to this trend. The beta is worth considering, but it is also important to determine if Nordic Shipholding is increasing its revenues and revenues. You can take a look for yourself, below.

CPSE: NORDIC Income Statement, March 14, 2019

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What is the impact of NORDIC's size on its beta?

Nordic Shipholding is a relatively small company with a market capitalization of ø179 m. Most companies of this size are not always actively traded. It does not take much money to actually move the stock price of a company as small as this one. This makes its beta value somewhat unusual so close to the global market.

What does this mean for you?

It is likely that there is a link between Nordic Shipholding's stock price and the broad market, because its beta value is quite close to it. 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. The purpose of this article is to inform investors about beta values, but important fundamental principles of a company, such as the financial health and performance performance of Nordic Shipholding, should also be considered. I urge you to continue your research by examining the following:

  1. Financial health: Are NORDIC'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 NORDIC 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 NORDIC's free historical visuals 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 = "Our goal is to provide you with a long-term research analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive business announcements or qualitative information.

If you notice an error that needs to be corrected, please contact the publisher at editorial-team@simplywallst.com. This article from Simply Wall St is of a general nature. This is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. Simply Wall St has no position on the actions mentioned. Thanks for the reading.

"data-reactid =" 52 "> Our goal is to provide you with a long-term, targeted research analysis based on fundamental data.Please note that our analysis may not take into account the latest announcements of price sensitive companies or qualitative information.

If you notice an error that needs to be corrected, please contact the publisher at editorial-team@simplywallst.com. This article from Simply Wall St is of a general nature. This is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. Simply Wall St has no position on the actions mentioned. Thanks for the reading.