If you're interested in Green River Gold Corp. (CNSX:CCR), 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. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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.
What does CCR's beta value mean to investors?
Zooming in on Green River Gold, we see it has a five year beta of 1.71. 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 Green River Gold 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 Green River Gold is growing earnings and revenue. You can take a look for yourself, below.
Does CCR's size influence the expected beta?
Green River Gold is a noticeably small company, with a market capitalisation of CA$1.6m. 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 Green River Gold 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. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Green River Gold’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
- Financial Health: Are CCR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has CCR 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 CCR's historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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 firstname.lastname@example.org. 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.