Anyone researching SRV Yhtiöt Oyj (HEL:SRV1V) 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. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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.
What SRV1V's beta value tells investors
Zooming in on SRV Yhtiöt Oyj, we see it has a five year beta of 1.16. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If the past is any guide, we would expect that SRV Yhtiöt Oyj shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether SRV Yhtiöt Oyj is growing earnings and revenue. You can take a look for yourself, below.
Could SRV1V's size cause it to be more volatile?
SRV Yhtiöt Oyj is a noticeably small company, with a market capitalisation of €102m. 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:
Beta only tells us that the SRV Yhtiöt Oyj 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. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as SRV Yhtiöt Oyj’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for SRV1V’s future growth? Take a look at our free research report of analyst consensus for SRV1V’s outlook.
- Past Track Record: Has SRV1V 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 SRV1V's historicals for more clarity.
- Other Interesting Stocks: It's worth checking to see how SRV1V measures up against other companies on valuation. You could start with this free list of prospective options.
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