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Does CorEnergy Infrastructure Trust, Inc. (NYSE:CORR) Have A Particularly Volatile Share Price?

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·4 min read
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If you own shares in CorEnergy Infrastructure Trust, Inc. (NYSE:CORR) 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

View our latest analysis for CorEnergy Infrastructure Trust

What CORR's beta value tells investors

Looking at the last five years, CorEnergy Infrastructure Trust has a beta of 1.31. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. Based on this history, investors should be aware that CorEnergy Infrastructure Trust are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it's also important to consider whether CorEnergy Infrastructure Trust is growing earnings and revenue. You can take a look for yourself, below.

NYSE:CORR Income Statement May 28th 2020
NYSE:CORR Income Statement May 28th 2020

Does CORR's size influence the expected beta?

CorEnergy Infrastructure Trust is a rather small company. It has a market capitalisation of US$158m, which means it is probably under the radar of most investors. 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 CorEnergy Infrastructure Trust 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 CORR is a good investment for you, we also need to consider important company-specific fundamentals such as CorEnergy Infrastructure Trust’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 CORR’s future growth? Take a look at our free research report of analyst consensus for CORR’s outlook.

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

  3. Other Interesting Stocks: It's worth checking to see how CORR measures up against other companies on valuation. You could start with this free list of prospective options.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.