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Does Market Volatility Impact Comba Telecom Systems Holdings Limited's (HKG:2342) Share Price?

Simply Wall St

Anyone researching Comba Telecom Systems Holdings Limited (HKG:2342) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 Comba Telecom Systems Holdings

What we can learn from 2342's beta value

Given that it has a beta of 1.71, we can surmise that the Comba Telecom Systems Holdings share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Comba Telecom Systems Holdings 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 Comba Telecom Systems Holdings is growing earnings and revenue. You can take a look for yourself, below.

SEHK:2342 Income Statement, October 25th 2019

How does 2342's size impact its beta?

Comba Telecom Systems Holdings is a small cap stock with a market capitalisation of HK$4.4b. Most companies this size are actively traded. It is quite common to see a small-cap stock with a beta greater than one. In part, that's because relatively few investors can influence the price of a smaller company, compared to a large company.

What this means for you:

Since Comba Telecom Systems Holdings tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Comba Telecom Systems Holdings’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 2342’s future growth? Take a look at our free research report of analyst consensus for 2342’s outlook.
  2. Past Track Record: Has 2342 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 2342's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how 2342 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.