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How Does Capital City Bank Group, Inc. (NASDAQ:CCBG) Affect Your Portfolio Volatility?

Andrew Edmonds

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Anyone researching Capital City Bank Group, Inc. (NASDAQ:CCBG) 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 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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.

View our latest analysis for Capital City Bank Group

What does CCBG’s beta value mean to investors?

Given that it has a beta of 0.82, we can surmise that the Capital City Bank Group share price has not been strongly impacted by broader market volatility (over the last 5 years). This means that — if history is a guide — buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). 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 Capital City Bank Group fares in that regard, below.

NASDAQGS:CCBG Income Statement Export February 11th 19

Could CCBG’s size cause it to be more volatile?

Capital City Bank Group is a rather small company. It has a market capitalisation of US$418m, which means it is probably under the radar of most investors. It is not unusual for very small companies to have a low beta value, especially if only low volumes of shares are traded. Even when they are traded more actively, the share price is often more susceptible to company specific developments than overall market volatility.

What this means for you:

One potential advantage of owning low beta stocks like Capital City Bank Group is that your overall portfolio won’t be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what’s happening in the broader market. In order to fully understand whether CCBG is a good investment for you, we also need to consider important company-specific fundamentals such as Capital City Bank Group’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 CCBG’s future growth? Take a look at our free research report of analyst consensus for CCBG’s outlook.
  2. Past Track Record: Has CCBG 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 CCBG’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how CCBG measures up against other companies on valuation. You could start with this free list of prospective options.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.