In This Article:
Anyone researching China Resources Phoenix Healthcare Holdings Company Limited (HKG:1515) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient 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.
Check out our latest analysis for China Resources Phoenix Healthcare Holdings
What 1515’s beta value tells investors
Zooming in on China Resources Phoenix Healthcare Holdings, we see it has a five year beta of 1.21. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market the market. If this beta value holds true in the future, China Resources Phoenix Healthcare Holdings 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 China Resources Phoenix Healthcare Holdings is growing earnings and revenue. You can take a look for yourself, below.
Could 1515’s size cause it to be more volatile?
China Resources Phoenix Healthcare Holdings is a small company, but not tiny and little known. It has a market capitalisation of HK$9.30b, which means it would be on the radar of intstitutional investors. It has a relatively high beta, which is not unusual among small-cap stocks. Because it takes less capital to move the share price of a smaller company, actively traded small-cap stocks often have a higher beta that a similar large-cap stock.