Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
If you own shares in HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) 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. 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 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. 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.
What we can learn from HTGM's beta value
Given that it has a beta of 1.85, we can surmise that the HTG Molecular Diagnostics share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that HTG Molecular Diagnostics 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 HTG Molecular Diagnostics is growing earnings and revenue. You can take a look for yourself, below.
Could HTGM's size cause it to be more volatile?
With a market capitalisation of US$61m, HTG Molecular Diagnostics is a very small company by global standards. It is quite likely to be unknown to most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.
What this means for you:
Since HTG Molecular Diagnostics has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as HTG Molecular Diagnostics’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 HTGM’s future growth? Take a look at our free research report of analyst consensus for HTGM’s outlook.
- Past Track Record: Has HTGM 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 HTGM's historicals for more clarity.
- Other Interesting Stocks: It's worth checking to see how HTGM 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 firstname.lastname@example.org. 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.