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Should You Be Concerned About United Community Banks, Inc.'s (NASDAQ:UCBI) Historical Volatility?

Simply Wall St

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If you own shares in United Community Banks, Inc. (NASDAQ:UCBI) 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 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 are more sensitive to general market forces than others. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

View our latest analysis for United Community Banks

What does UCBI's beta value mean to investors?

Given that it has a beta of 1.24, we can surmise that the United Community Banks share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, United Community Banks shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. 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 United Community Banks fares in that regard, below.

NasdaqGS:UCBI Income Statement, July 15th 2019

Does UCBI's size influence the expected beta?

With a market capitalisation of US$2.2b, United Community Banks is a pretty big company, even by global standards. It is quite likely well known to very many investors. It has a relatively high beta, suggesting it may be somehow leveraged to macroeconomic conditions. For example, it might be a high growth stock with lots of investors trading the shares. It's notable when large companies to have high beta values, because it usually takes substantial capital flows to move their share prices.

What this means for you:

Since United Community Banks 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 United Community Banks’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 UCBI’s future growth? Take a look at our free research report of analyst consensus for UCBI’s outlook.
  2. Past Track Record: Has UCBI 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 UCBI's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how UCBI 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.