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If you’re interested in Flat Glass Group Co Ltd (HKG:6865), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all 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.
View our latest analysis for Flat Glass Group
What we can learn from 6865’s beta value
Given that it has a beta of 1.84, we can surmise that the Flat Glass Group share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that Flat Glass Group 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 Flat Glass Group is growing earnings and revenue. You can take a look for yourself, below.
How does 6865’s size impact its beta?
Flat Glass Group is a small cap stock with a market capitalisation of HK$3.9b. Most companies this size are actively traded. It is quite common to see a small-cap stock with a beta greater than one. In part, that’s because relatively few investors can influence the price of a smaller company, compared to a large company.
What this means for you:
Since Flat Glass Group tends to moves up when the market is going up, and down when it’s going down, potential investors may wish to reflect on the overall market, when considering the stock. In order to fully understand whether 6865 is a good investment for you, we also need to consider important company-specific fundamentals such as Flat Glass Group’s financial health and performance track record. I highly recommend you dive deeper by considering the following: