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Is Chow Sang Sang Holdings International Limited (HKG:116) A Volatile Stock?

Simply Wall St

If you own shares in Chow Sang Sang Holdings International Limited (HKG:116) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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 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.

View our latest analysis for Chow Sang Sang Holdings International

What does 116's beta value mean to investors?

Looking at the last five years, Chow Sang Sang Holdings International has a beta of 0.81. The fact that this is well below 1 indicates that its share price movements haven't historically been very sensitive to overall market volatility. This suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio's weighted average beta is higher than 0.81. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Chow Sang Sang Holdings International fares in that regard, below.

SEHK:116 Income Statement, November 13th 2019

Does 116's size influence the expected beta?

Chow Sang Sang Holdings International is a small company, but not tiny and little known. It has a market capitalisation of HK$6.2b, which means it would be on the radar of intstitutional investors. Small cap stocks ofthen have a higher beta than the overall market. However, small companies can also be strongly impacted by company specific developments, which can move the share price in ways that are unrelated to the broader market. That could explain why this one has a low beta value.

What this means for you:

The Chow Sang Sang Holdings International doesn't usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. In order to fully understand whether 116 is a good investment for you, we also need to consider important company-specific fundamentals such as Chow Sang Sang Holdings International’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for 116’s future growth? Take a look at our free research report of analyst consensus for 116’s outlook.
  2. Past Track Record: Has 116 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 116's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how 116 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.