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Anyone researching HJ Capital (International) Holdings Company Limited (HKG:982) 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. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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.
View our latest analysis for HJ Capital (International) Holdings
What 982's beta value tells investors
Given that it has a beta of 1.66, we can surmise that the HJ Capital (International) Holdings share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that HJ Capital (International) Holdings are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it's also important to consider whether HJ Capital (International) Holdings is growing earnings and revenue. You can take a look for yourself, below.
Does 982's size influence the expected beta?
With a market capitalisation of HK$2.0b, HJ Capital (International) Holdings is a very small company by global standards. It is quite likely to be unknown to 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 HJ Capital (International) Holdings has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as HJ Capital (International) Holdings’s financial health and performance track record. I urge you to continue your research by taking a look at the following: