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Does The Telson Mining Corporation (CVE:TSN) Share Price Tend To Follow The Market?

Simply Wall St

Anyone researching Telson Mining Corporation (CVE:TSN) 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. 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. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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.

View our latest analysis for Telson Mining

What we can learn from TSN's beta value

Zooming in on Telson Mining, we see it has a five year beta of 1.99. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If the past is any guide, we would expect that Telson Mining shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether Telson Mining is growing earnings and revenue. You can take a look for yourself, below.

TSXV:TSN Income Statement, July 30th 2019

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

Telson Mining is a noticeably small company, with a market capitalisation of CA$42m. Most companies this size are not always actively traded. 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 Telson Mining 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. In order to fully understand whether TSN is a good investment for you, we also need to consider important company-specific fundamentals such as Telson Mining’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 TSN’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 TSN 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 TSN'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.

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.