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Does SunLink Health Systems, Inc. (NYSEMKT:SSY) Have A Particularly Volatile Share Price?

Simply Wall St

If you own shares in SunLink Health Systems, Inc. (NYSEMKT:SSY) 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. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 are more sensitive to general market forces than others. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is 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 SunLink Health Systems

What we can learn from SSY's beta value

Zooming in on SunLink Health Systems, we see it has a five year beta of 1.43. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. Based on this history, investors should be aware that SunLink Health Systems 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 SunLink Health Systems is growing earnings and revenue. You can take a look for yourself, below.

AMEX:SSY Income Statement May 25th 2020

Does SSY's size influence the expected beta?

With a market capitalisation of US$5.8m, SunLink Health Systems 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 SunLink Health Systems tends to move 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. In order to fully understand whether SSY is a good investment for you, we also need to consider important company-specific fundamentals such as SunLink Health Systems’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 SSY’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 SSY 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 SSY'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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.