Anyone researching Ballantyne Strong, Inc (NYSEMKT:BTN) 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 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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.
What we can learn from BTN's beta value
While history does not always repeat, this level of beta may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Beta is worth considering, but it's also important to consider whether Ballantyne Strong is growing earnings and revenue. You can take a look for yourself, below.
Could BTN's size cause it to be more volatile?
Ballantyne Strong is a rather small company. It has a market capitalisation of US$23m, which means it is probably under the radar of most investors. Companies this small are usually more volatile than the market, whether or not that volatility is correlated. Therefore, it's a bit surprising to see that this stock has a beta value so close to the overall market.
What this means for you:
Ballantyne Strong has a beta value quite close to that of the overall market. That doesn't tell us much on its own, so it is probably worth considering whether the company is growing, if you're looking for stocks that will go up more than the overall market. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Ballantyne Strong’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
- Financial Health: Are BTN’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.
- Past Track Record: Has BTN 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 BTN's historicals for more clarity.
- 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.
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