Anyone researching Kiriacoulis Mediterranean Cruises Shipping SA (ATH:KYRI) 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 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 is a widely used metric to measure a stock’s exposure to market risk (volatility). Before we go on, it’s worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that ‘volatility is far from synonymous with risk.’ Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is 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.
See our latest analysis for Kiriacoulis Mediterranean Cruises Shipping
What we can learn from KYRI’s beta value
Given that it has a beta of 1.2, we can surmise that the Kiriacoulis Mediterranean Cruises Shipping share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Kiriacoulis Mediterranean Cruises Shipping are likely to rise strongly in times of greed, but sell off in times of fear. 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 Kiriacoulis Mediterranean Cruises Shipping’s revenue and earnings in the image below.
Could KYRI’s size cause it to be more volatile?
Kiriacoulis Mediterranean Cruises Shipping is a noticeably small company, with a market capitalisation of €8.6m. 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.