Does The Trelleborg AB (publ) (STO:TREL B) Share Price Tend To Follow The Market?
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If you own shares in Trelleborg AB (publ) (STO:TREL B) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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. 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.
See our latest analysis for Trelleborg
What TREL B's beta value tells investors
As it happens, Trelleborg has a five year beta of 1.01. This is fairly close to 1, so the stock has historically shown a somewhat similar level of volatility as the market. Using history as a guide, we might surmise that the share price is likely to be influenced by market voltility going forward but it probably won't be particularly sensitive to it. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Trelleborg's revenue and earnings in the image below.
Could TREL B's size cause it to be more volatile?
With a market capitalisation of kr36b, Trelleborg is a pretty big company, even by global standards. It is quite likely well known to very many investors. It's not overly surprising to see large companies with beta values reasonably close to the market average. After all, large companies make up a higher weighting of the index than do small companies.
What this means for you:
Trelleborg has a beta value quite close to that of the overall market. That doesn't tell us much on its own, so it is probably worth considering whether the company is growing, if you're looking for stocks that will go up more than the overall market. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Trelleborg’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for TREL B’s future growth? Take a look at our free research report of analyst consensus for TREL B’s outlook.
Past Track Record: Has TREL B 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 TREL B's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how TREL B 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.
