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If you’re interested in Arnoldo Mondadori Editore SpA (BIT:MN), 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. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated 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. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
View our latest analysis for Arnoldo Mondadori Editore
What does MN’s beta value mean to investors?
Given that it has a beta of 1.69, we can surmise that the Arnoldo Mondadori Editore share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Arnoldo Mondadori Editore are likely to rise strongly in times of greed, but sell off in times of fear. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Arnoldo Mondadori Editore fares in that regard, below.
Could MN’s size cause it to be more volatile?
Arnoldo Mondadori Editore is a rather small company. It has a market capitalisation of €344m, which means it is probably under the radar of most investors. 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:
Since Arnoldo Mondadori Editore 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. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Arnoldo Mondadori Editore’s financial health and performance track record. I highly recommend you dive deeper by considering the following: