If you're interested in The United Laboratories International Holdings Limited (HKG:3933), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. 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 second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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 below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
What we can learn from 3933's beta value
Zooming in on United Laboratories International Holdings, we see it has a five year beta of 1.26. 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 United Laboratories International Holdings 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 United Laboratories International Holdings is growing earnings and revenue. You can take a look for yourself, below.
How does 3933's size impact its beta?
United Laboratories International Holdings is a small company, but not tiny and little known. It has a market capitalisation of HK$7.2b, which means it would be on the radar of intstitutional investors. It is quite common to see a small-cap stock with a beta greater than one. In part, that's because relatively few investors can influence the price of a smaller company, compared to a large company.
What this means for you:
Since United Laboratories International Holdings has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as United Laboratories International Holdings’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for 3933’s future growth? Take a look at our free research report of analyst consensus for 3933’s outlook.
- Past Track Record: Has 3933 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 3933's historicals for more clarity.
- Other Interesting Stocks: It's worth checking to see how 3933 measures up against other companies on valuation. You could start with this free list of prospective options.
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