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If you own shares in Phoenix Media Investment (Holdings) Limited (HKG:2008) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 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. 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.
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See our latest analysis for Phoenix Media Investment (Holdings)
What we can learn from 2008's beta value
Given that it has a beta of 1.24, we can surmise that the Phoenix Media Investment (Holdings) share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Phoenix Media Investment (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 Phoenix Media Investment (Holdings) is growing earnings and revenue. You can take a look for yourself, below.
How does 2008's size impact its beta?
Phoenix Media Investment (Holdings) is a noticeably small company, with a market capitalisation of HK$3.5b. Most companies this size are not always actively traded. It has a relatively high beta, suggesting it is fairly actively traded for a company of its size. Because it takes less capital to move the share price of a small company like this, when a stock this size is actively traded it is quite often more sensitive to market volatility than similar large companies.