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Does The Stratus Properties Inc. (NASDAQ:STRS) Share Price Tend To Follow The Market?

Simply Wall St
·3 mins read

Anyone researching Stratus Properties Inc. (NASDAQ:STRS) 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 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. 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 Stratus Properties

What does STRS's beta value mean to investors?

Looking at the last five years, Stratus Properties has a beta of 0.88. 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 Stratus Properties is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:STRS Income Statement April 8th 2020
NasdaqGS:STRS Income Statement April 8th 2020

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

Stratus Properties is a rather small company. It has a market capitalisation of US$146m, which means it is probably under the radar of most investors. It is not unusual for very small companies to have a low beta value, especially if only low volumes of shares are traded. Even when they are traded more actively, the share price is often more susceptible to company specific developments than overall market volatility.

What this means for you:

Since Stratus Properties is not heavily influenced by market moves, its share price is probably far more dependent on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. In order to fully understand whether STRS is a good investment for you, we also need to consider important company-specific fundamentals such as Stratus Properties’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Financial Health: Are STRS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

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

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.

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. Thank you for reading.