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How Corcept Therapeutics Incorporated (NASDAQ:CORT) Can Impact Your Portfolio Volatility

Simply Wall St

If you own shares in Corcept Therapeutics Incorporated (NASDAQ:CORT) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 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. 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.

See our latest analysis for Corcept Therapeutics

What does CORT's beta value mean to investors?

Given that it has a beta of 1.25, we can surmise that the Corcept Therapeutics share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Corcept Therapeutics are likely to rise strongly in times of greed, but sell off in times of fear. 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 Corcept Therapeutics fares in that regard, below.

NasdaqCM:CORT Income Statement, January 30th 2020

How does CORT's size impact its beta?

Corcept Therapeutics is a small cap stock with a market capitalisation of US$1.5b. Most companies this size are actively traded. It is quite common to see a small-cap stock with a beta greater than one. In part, that's because relatively few investors can influence the price of a smaller company, compared to a large company.

What this means for you:

Beta only tells us that the Corcept Therapeutics share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there's plenty more to learn. In order to fully understand whether CORT is a good investment for you, we also need to consider important company-specific fundamentals such as Corcept Therapeutics’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for CORT’s future growth? Take a look at our free research report of analyst consensus for CORT’s outlook.
  2. Past Track Record: Has CORT 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 CORT's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how CORT measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.