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Should You Be Concerned About Sandy Spring Bancorp, Inc.'s (NASDAQ:SASR) Historical Volatility?

Simply Wall St

If you're interested in Sandy Spring Bancorp, Inc. (NASDAQ:SASR), 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. 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.

See our latest analysis for Sandy Spring Bancorp

What we can learn from SASR's beta value

Given that it has a beta of 0.85, we can surmise that the Sandy Spring Bancorp share price has not been strongly impacted by broader market volatility (over the last 5 years). 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 0.85. Beta is worth considering, but it's also important to consider whether Sandy Spring Bancorp is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:SASR Income Statement, July 29th 2019

Does SASR's size influence the expected beta?

With a market capitalisation of US$1.3b, Sandy Spring Bancorp is a small cap stock. However, it is big enough to catch the attention of professional investors. Small companies often have a high beta value, but they can be heavily influenced by company-specific events. This might explain why this stock has a low beta.

What this means for you:

One potential advantage of owning low beta stocks like Sandy Spring Bancorp is that your overall portfolio won't be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what's happening in the broader market. In order to fully understand whether SASR is a good investment for you, we also need to consider important company-specific fundamentals such as Sandy Spring Bancorp’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 SASR’s future growth? Take a look at our free research report of analyst consensus for SASR’s outlook.
  2. Past Track Record: Has SASR 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 SASR's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how SASR 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.