U.S. Markets open in 18 mins

Should You Be Concerned About Advanced Proteome Therapeutics Corporation's (CVE:APC) Historical Volatility?

Simply Wall St

If you own shares in Advanced Proteome Therapeutics Corporation (CVE:APC) 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 type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.

Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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 greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

Check out our latest analysis for Advanced Proteome Therapeutics

What APC's beta value tells investors

Zooming in on Advanced Proteome Therapeutics, we see it has a five year beta of 1.19. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If the past is any guide, we would expect that Advanced Proteome Therapeutics 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 Advanced Proteome Therapeutics is growing earnings and revenue. You can take a look for yourself, below.

TSXV:APC Income Statement, October 12th 2019

Does APC's size influence the expected beta?

Advanced Proteome Therapeutics is a rather small company. It has a market capitalisation of CA$1.6m, which means it is probably under the radar of most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Since Advanced Proteome Therapeutics 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. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Advanced Proteome Therapeutics’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Financial Health: Are APC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has APC 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 APC's historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.