Anyone researching Panariagroup Industrie Ceramiche SpA (BIT:PAN) might want to consider the historical volatility of the share price. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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. 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 Panariagroup Industrie Ceramiche
What does PAN’s beta value mean to investors?
Given that it has a beta of 1.34, we can surmise that the Panariagroup Industrie Ceramiche share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Panariagroup Industrie Ceramiche shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it’s also important to consider whether Panariagroup Industrie Ceramiche is growing earnings and revenue. You can take a look for yourself, below.
Could PAN’s size cause it to be more volatile?
Panariagroup Industrie Ceramiche is a rather small company. It has a market capitalisation of €79m, which means it is probably under the radar of most investors. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.
What this means for you:
Since Panariagroup Industrie Ceramiche 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 PAN is a good investment for you, we also need to consider important company-specific fundamentals such as Panariagroup Industrie Ceramiche’s financial health and performance track record. I urge you to continue your research by taking a look at the following: