Should You Be Concerned About PACC Offshore Services Holdings Ltd.'s (SGX:U6C) Historical Volatility?
Anyone researching PACC Offshore Services Holdings Ltd. (SGX:U6C) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of one. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
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Check out our latest analysis for PACC Offshore Services Holdings
What we can learn from U6C's beta value
Zooming in on PACC Offshore Services Holdings, we see it has a five year beta of 1.17. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, PACC Offshore Services Holdings shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how PACC Offshore Services Holdings fares in that regard, below.
Could U6C's size cause it to be more volatile?
PACC Offshore Services Holdings is a noticeably small company, with a market capitalisation of S$316m. Most companies this size are not always actively traded. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.
What this means for you:
Since PACC Offshore Services Holdings has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether U6C is a good investment for you, we also need to consider important company-specific fundamentals such as PACC Offshore Services Holdings’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for U6C’s future growth? Take a look at our free research report of analyst consensus for U6C’s outlook.
Past Track Record: Has U6C been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of U6C's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how U6C measures up against other companies on valuation. You could start with this free list of prospective options.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
