Does The Bar Harbor Bankshares (NYSEMKT:BHB) Share Price Tend To Follow The Market?

Simply Wall St
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Anyone researching Bar Harbor Bankshares (NYSEMKT:BHB) might want to consider the historical volatility of the share price. 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. 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.

Check out our latest analysis for Bar Harbor Bankshares

What we can learn from BHB's beta value

Using history as a guide, we might surmise that the share price is likely to be influenced by market volatility going forward but it probably won't be particularly sensitive to it. 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 Bar Harbor Bankshares fares in that regard, below.

AMEX:BHB Income Statement, March 12th 2020
AMEX:BHB Income Statement, March 12th 2020

Could BHB's size cause it to be more volatile?

Bar Harbor Bankshares is a noticeably small company, with a market capitalisation of US$287m. Most companies this size are not always actively traded. It doesn't take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it has a beta value so close to the overall market.

What this means for you:

Bar Harbor Bankshares 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. In order to fully understand whether BHB is a good investment for you, we also need to consider important company-specific fundamentals such as Bar Harbor Bankshares’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Financial Health: Are BHB’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.

  2. Past Track Record: Has BHB 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 BHB's historicals for more clarity.

  3. 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.

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.

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