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Does China Infrastructure & Logistics Group Ltd. (HKG:1719) Have A Particularly Volatile Share Price?

Simply Wall St

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Anyone researching China Infrastructure & Logistics Group Ltd. (HKG:1719) 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. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 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.

Check out our latest analysis for China Infrastructure & Logistics Group

What does 1719's beta value mean to investors?

Looking at the last five years, China Infrastructure & Logistics Group has a beta of 1.12. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that China Infrastructure & Logistics Group shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether China Infrastructure & Logistics Group is growing earnings and revenue. You can take a look for yourself, below.

SEHK:1719 Income Statement, July 17th 2019

Does 1719's size influence the expected beta?

China Infrastructure & Logistics Group is a noticeably small company, with a market capitalisation of HK$1.7b. Most companies this size are not always actively traded. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.

What this means for you:

Beta only tells us that the China Infrastructure & Logistics Group 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. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as China Infrastructure & Logistics Group’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 1719’s future growth? Take a look at our free research report of analyst consensus for 1719’s outlook.
  2. Past Track Record: Has 1719 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 1719's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how 1719 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.