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Should You Be Concerned About Crystal Peak Minerals Inc.'s (CVE:CPM) Historical Volatility?

Simply Wall St

Anyone researching Crystal Peak Minerals Inc. (CVE:CPM) 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 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. 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 Crystal Peak Minerals

What we can learn from CPM's beta value

Given that it has a beta of 1.18, we can surmise that the Crystal Peak Minerals share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Crystal Peak Minerals shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it's also important to consider whether Crystal Peak Minerals is growing earnings and revenue. You can take a look for yourself, below.

TSXV:CPM Income Statement, November 11th 2019

Does CPM's size influence the expected beta?

With a market capitalisation of CA$37m, Crystal Peak Minerals is a very small company by global standards. It is quite likely to be unknown to 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 Crystal Peak Minerals 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 CPM is a good investment for you, we also need to consider important company-specific fundamentals such as Crystal Peak Minerals’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Financial Health: Are CPM’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 CPM 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 CPM'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.