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If you're interested in Yangzhou Guangling District Taihe Rural Micro-finance Company Limited (HKG:8252), 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. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 are more sensitive to general market forces than others. 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 Yangzhou Guangling District Taihe Rural Micro-finance
What does 8252's beta value mean to investors?
Looking at the last five years, Yangzhou Guangling District Taihe Rural Micro-finance has a beta of 1.64. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that Yangzhou Guangling District Taihe Rural Micro-finance 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 Yangzhou Guangling District Taihe Rural Micro-finance is growing earnings and revenue. You can take a look for yourself, below.
Could 8252's size cause it to be more volatile?
Yangzhou Guangling District Taihe Rural Micro-finance is a rather small company. It has a market capitalisation of HK$1.6b, 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.