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How Does TriNet Group, Inc. (NYSE:TNET) Affect Your Portfolio Volatility?

Simply Wall St

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If you own shares in TriNet Group, Inc. (NYSE:TNET) 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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. 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 TriNet Group

What does TNET's beta value mean to investors?

Zooming in on TriNet Group, we see it has a five year beta of 1.95. 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 TriNet Group 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 TriNet Group is growing earnings and revenue. You can take a look for yourself, below.

NYSE:TNET Income Statement, June 25th 2019
NYSE:TNET Income Statement, June 25th 2019

Does TNET's size influence the expected beta?

TriNet Group is a reasonably big company, with a market capitalisation of US$4.8b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It has a relatively high beta, suggesting it may be somehow leveraged to macroeconomic conditions. For example, it might be a high growth stock with lots of investors trading the shares. It's notable when large companies to have high beta values, because it usually takes substantial capital flows to move their share prices.

What this means for you:

Since TriNet Group 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 TNET is a good investment for you, we also need to consider important company-specific fundamentals such as TriNet 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 TNET’s future growth? Take a look at our free research report of analyst consensus for TNET’s outlook.

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

  3. Other Interesting Stocks: It's worth checking to see how TNET 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.