Should You Be Concerned About United States Antimony Corporation's (NYSEMKT:UAMY) Historical Volatility?

Simply Wall St

If you own shares in United States Antimony Corporation (NYSEMKT:UAMY) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 are more sensitive to general market forces than others. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

See our latest analysis for United States Antimony

What we can learn from UAMY's beta value

Given that it has a beta of 1.40, we can surmise that the United States Antimony share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that United States Antimony are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it's also important to consider whether United States Antimony is growing earnings and revenue. You can take a look for yourself, below.

AMEX:UAMY Income Statement, October 17th 2019

Could UAMY's size cause it to be more volatile?

United States Antimony is a noticeably small company, with a market capitalisation of US$38m. Most companies this size are not always actively traded. It has a relatively high beta, suggesting it is fairly actively traded for a company of its size. Because it takes less capital to move the share price of a small company like this, when a stock this size is actively traded it is quite often more sensitive to market volatility than similar large companies.

What this means for you:

Beta only tells us that the United States Antimony share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there's plenty more to learn. In order to fully understand whether UAMY is a good investment for you, we also need to consider important company-specific fundamentals such as United States Antimony’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Financial Health: Are UAMY’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has UAMY 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 UAMY's historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.