Does The Corporate Office Properties Trust (NYSE:OFC) Share Price Fall With The Market?
If you own shares in Corporate Office Properties Trust (NYSE:OFC) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the 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. 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.
See our latest analysis for Corporate Office Properties Trust
What OFC's beta value tells investors
Looking at the last five years, Corporate Office Properties Trust has a beta of 0.85. The fact that this is well below 1 indicates that its share price movements haven't historically been very sensitive to overall market volatility. 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). Beta is worth considering, but it's also important to consider whether Corporate Office Properties Trust is growing earnings and revenue. You can take a look for yourself, below.
Does OFC's size influence the expected beta?
With a market capitalisation of US$3.3b, Corporate Office Properties Trust is a pretty big company, even by global standards. It is quite likely well known to very many investors. When a large company like this trades with a low beta value, it is often because there is some other systemic factor influencing the share price. For example, commodity prices might influence a mining company strongly, while expectations around dividend payments (and capital expenditure requirements) might have a big impact on utilities.
What this means for you:
The Corporate Office Properties Trust doesn't usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. In order to fully understand whether OFC is a good investment for you, we also need to consider important company-specific fundamentals such as Corporate Office Properties Trust’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for OFC’s future growth? Take a look at our free research report of analyst consensus for OFC’s outlook.
Past Track Record: Has OFC 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 OFC's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how OFC measures up against other companies on valuation. You could start with this free list of prospective options.
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.
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