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How Does New York Mortgage Trust, Inc. (NASDAQ:NYMT) Affect Your Portfolio Volatility?

Simply Wall St

If you're interested in New York Mortgage Trust, Inc. (NASDAQ:NYMT), 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 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 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. 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.

Check out our latest analysis for New York Mortgage Trust

What NYMT's beta value tells investors

Zooming in on New York Mortgage Trust, we see it has a five year beta of 0.81. This is below 1, so historically its share price has been rather independent from the market. If history is a good guide, owning the stock should help ensure that your portfolio is not overly sensitive to market volatility. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how New York Mortgage Trust fares in that regard, below.

NasdaqGS:NYMT Income Statement, February 7th 2020

Does NYMT's size influence the expected beta?

New York Mortgage Trust is a reasonably big company, with a market capitalisation of US$2.0b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It is a little unusual to see big companies like this trade on low beta values. Oftentimes there is some other clear influence on the share price, overshadowing market volatility.

What this means for you:

Since New York Mortgage Trust is not heavily influenced by market moves, its share price is probably far more dependent on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as New York Mortgage Trust’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 NYMT’s future growth? Take a look at our free research report of analyst consensus for NYMT’s outlook.
  2. Past Track Record: Has NYMT 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 NYMT's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how NYMT measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.