U.S. Markets close in 6 hrs 16 mins
  • S&P 500

    4,178.61
    -6.86 (-0.16%)
     
  • Dow 30

    34,085.73
    -114.94 (-0.34%)
     
  • Nasdaq

    14,030.83
    -21.51 (-0.15%)
     
  • Russell 2000

    2,262.67
    +5.60 (+0.25%)
     
  • Crude Oil

    63.30
    +0.17 (+0.27%)
     
  • Gold

    1,772.70
    -7.50 (-0.42%)
     
  • Silver

    25.86
    -0.24 (-0.92%)
     
  • EUR/USD

    1.2029
    +0.0049 (+0.4090%)
     
  • 10-Yr Bond

    1.6060
    +0.0330 (+2.10%)
     
  • Vix

    17.19
    +0.62 (+3.74%)
     
  • GBP/USD

    1.3962
    +0.0123 (+0.8852%)
     
  • USD/JPY

    108.2710
    -0.5120 (-0.4707%)
     
  • BTC-USD

    56,606.16
    +1,832.94 (+3.35%)
     
  • CMC Crypto 200

    1,283.40
    -15.56 (-1.20%)
     
  • FTSE 100

    7,007.28
    -12.25 (-0.17%)
     
  • Nikkei 225

    29,685.37
    +2.00 (+0.01%)
     

Before You Buy Hypoport AG (FRA:HYQ), Consider Its Volatility

  • Oops!
    Something went wrong.
    Please try again later.
Yolanda Lovett
  • Oops!
    Something went wrong.
    Please try again later.

Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!

Anyone researching Hypoport AG (FRA:HYQ) 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 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. 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.

See our latest analysis for Hypoport

What does HYQ’s beta value mean to investors?

Zooming in on Hypoport, we see it has a five year beta of 1.47. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market the market. If the past is any guide, we would expect that Hypoport 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 Hypoport is growing earnings and revenue. You can take a look for yourself, below.

DB:HYQ Income Statement, February 22nd 2019
DB:HYQ Income Statement, February 22nd 2019

How does HYQ’s size impact its beta?

With a market capitalisation of €1.1b, Hypoport is a small cap stock. However, it is big enough to catch the attention of professional 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.

What this means for you:

Since Hypoport tends to moves up when the market is going up, and down when it’s going down, potential investors may wish to reflect on the overall market, when considering the stock. In order to fully understand whether HYQ is a good investment for you, we also need to consider important company-specific fundamentals such as Hypoport’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for HYQ’s future growth? Take a look at our free research report of analyst consensus for HYQ’s outlook.

  2. Past Track Record: Has HYQ been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of HYQ’s historicals for more clarity.

  3. Other Interesting Stocks: It’s worth checking to see how HYQ measures up against other companies on valuation. You could start with this free list of prospective options.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.