Anyone researching Phillips Carbon Black Limited (NSE:PHILIPCARB) 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. 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 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 are more sensitive to general market forces than others. 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. 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.
View our latest analysis for Phillips Carbon Black
What we can learn from PHILIPCARB’s beta value
Looking at the last five years, Phillips Carbon Black has a beta of 1.35. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. Based on this history, investors should be aware that Phillips Carbon Black 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 Phillips Carbon Black is growing earnings and revenue. You can take a look for yourself, below.
How does PHILIPCARB’s size impact its beta?
Phillips Carbon Black is a noticeably small company, with a market capitalisation of ₹35.6b. Most companies this size are not always actively traded. 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 Phillips Carbon Black 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. In order to fully understand whether PHILIPCARB is a good investment for you, we also need to consider important company-specific fundamentals such as Phillips Carbon Black’s financial health and performance track record. I highly recommend you dive deeper by considering the following: