Should You Be Concerned About Yangzijiang Shipbuilding (Holdings) Ltd.'s (SGX:BS6) Historical Volatility?
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If you own shares in Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6) 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. 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 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 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 below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
View our latest analysis for Yangzijiang Shipbuilding (Holdings)
What BS6's beta value tells investors
Zooming in on Yangzijiang Shipbuilding (Holdings), we see it has a five year beta of 1.22. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, Yangzijiang Shipbuilding (Holdings) shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Yangzijiang Shipbuilding (Holdings)'s revenue and earnings in the image below.
Does BS6's size influence the expected beta?
Yangzijiang Shipbuilding (Holdings) is a fairly large company. It has a market capitalisation of S$6.0b, which means it is probably on the radar of most investors. It takes a lot of money to influence the share price of large companies like this one. That makes it interesting to note that its share price has a history of sensitivity to market volatility. There might be some aspect of the business that means profits are leveraged to the economic cycle.
What this means for you:
Since Yangzijiang Shipbuilding (Holdings) has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Yangzijiang Shipbuilding (Holdings)’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for BS6’s future growth? Take a look at our free research report of analyst consensus for BS6’s outlook.
Past Track Record: Has BS6 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 BS6's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how BS6 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.
