Does Wonderful Sky Financial Group Holdings Limited (HKG:1260) Go Up With The Market?
If you’re interested in Wonderful Sky Financial Group Holdings Limited (HKG:1260), 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. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 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 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 Wonderful Sky Financial Group Holdings
What 1260’s beta value tells investors
Given that it has a beta of 1.21, we can surmise that the Wonderful Sky Financial Group Holdings share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Wonderful Sky Financial Group 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 Wonderful Sky Financial Group Holdings is growing earnings and revenue. You can take a look for yourself, below.
How does 1260’s size impact its beta?
Wonderful Sky Financial Group Holdings is a noticeably small company, with a market capitalisation of HK$1.46b. 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 Wonderful Sky Financial Group 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. In order to fully understand whether 1260 is a good investment for you, we also need to consider important company-specific fundamentals such as Wonderful Sky Financial Group Holdings’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 1260’s future growth? Take a look at our free research report of analyst consensus for 1260’s outlook.
Past Track Record: Has 1260 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 1260’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how 1260 measures up against other companies on valuation. You could start with this free list of prospective options.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
