How Does Beijer Ref AB (publ) (STO:BEIJ B) Affect Your Portfolio Volatility?
If you own shares in Beijer Ref AB (publ) (STO:BEIJ B) 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 other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient 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 greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
Check out our latest analysis for Beijer Ref
What does BEIJ B's beta value mean to investors?
With a beta of 0.97, (which is quite close to 1) the share price of Beijer Ref has historically been about as voltile as the broader market. Using history as a guide, we might surmise that the share price is likely to be influenced by market voltility going forward but it probably won't be particularly sensitive to it. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Beijer Ref's revenue and earnings in the image below.
Does BEIJ B's size influence the expected beta?
Beijer Ref is a reasonably big company, with a market capitalisation of kr27b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It's not overly surprising to see large companies with beta values reasonably close to the market average. After all, large companies make up a higher weighting of the index than do small companies.
What this means for you:
Beijer Ref has a beta value quite close to that of the overall market. That doesn't tell us much on its own, so it is probably worth considering whether the company is growing, if you're looking for stocks that will go up more than the overall market. In order to fully understand whether BEIJ B is a good investment for you, we also need to consider important company-specific fundamentals such as Beijer Ref’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 BEIJ B’s future growth? Take a look at our free research report of analyst consensus for BEIJ B’s outlook.
Past Track Record: Has BEIJ B 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 BEIJ B's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how BEIJ B measures up against other companies on valuation. You could start with this free list of prospective options.
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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.