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Should You Be Concerned About Automotive Properties Real Estate Investment Trust's (TSE:APR.UN) Historical Volatility?

Simply Wall St

If you're interested in Automotive Properties Real Estate Investment Trust (TSE:APR.UN), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. 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 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 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.

View our latest analysis for Automotive Properties Real Estate Investment Trust

What APR.UN's beta value tells investors

Automotive Properties Real Estate Investment Trust has a five-year beta of 0.96. This is reasonably close to the market beta of 1, so the stock has in the past displayed similar levels of volatility to the overall market. If the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. 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 Automotive Properties Real Estate Investment Trust fares in that regard, below.

TSX:APR.UN Income Statement, April 11th 2019

Could APR.UN's size cause it to be more volatile?

With a market capitalisation of CA$339m, Automotive Properties Real Estate Investment Trust is a very small company by global standards. It is quite likely to be unknown to most investors. It doesn't take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it has a beta value so close to the overall market.

What this means for you:

Since Automotive Properties Real Estate Investment Trust has a beta close to one, it will probably show a positive return when the market is moving up, based on history. If you're trying to generate better returns than the market, it would be worth thinking about other metrics such as cashflows, dividends and revenue growth might be a more useful guide to the future. In order to fully understand whether APR.UN is a good investment for you, we also need to consider important company-specific fundamentals such as Automotive Properties Real Estate Investment Trust’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 APR.UN’s future growth? Take a look at our free research report of analyst consensus for APR.UN’s outlook.
  2. Past Track Record: Has APR.UN 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 APR.UN's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how APR.UN 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.