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Does Market Volatility Impact Sino Grandness Food Industry Group Limited's (SGX:T4B) Share Price?

Simply Wall St

Anyone researching Sino Grandness Food Industry Group Limited (SGX:T4B) 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. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

View our latest analysis for Sino Grandness Food Industry Group

What does T4B's beta value mean to investors?

Looking at the last five years, Sino Grandness Food Industry Group has a beta of 0.91. 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 suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio's weighted average beta is higher than 0.91. Beta is worth considering, but it's also important to consider whether Sino Grandness Food Industry Group is growing earnings and revenue. You can take a look for yourself, below.

SGX:T4B Income Statement, August 23rd 2019

Could T4B's size cause it to be more volatile?

Sino Grandness Food Industry Group is a noticeably small company, with a market capitalisation of S$50m. Most companies this size are not always actively traded. Very small companies often have a low beta value because their share prices are not well correlated with market volatility. This could be because the price is reacting to company specific events. Alternatively, the shares may not be actively traded.

What this means for you:

One potential advantage of owning low beta stocks like Sino Grandness Food Industry Group is that your overall portfolio won't be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what's happening in the broader market. In order to fully understand whether T4B is a good investment for you, we also need to consider important company-specific fundamentals such as Sino Grandness Food Industry 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 T4B’s future growth? Take a look at our free research report of analyst consensus for T4B’s outlook.
  2. Past Track Record: Has T4B 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 T4B's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how T4B 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.