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What Kind Of Share Price Volatility Should You Expect For Travel Expert (Asia) Enterprises Limited (HKG:1235)?

Simply Wall St

Anyone researching Travel Expert (Asia) Enterprises Limited (HKG:1235) might want to consider the historical volatility of the share price. 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 type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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. 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.

View our latest analysis for Travel Expert (Asia) Enterprises

What we can learn from 1235’s beta value

Looking at the last five years, Travel Expert (Asia) Enterprises has a beta of 0.83. The fact that this is well below 1 indicates that its share price movements haven’t historically been very sensitive to overall market volatility. If history is a good guide, owning the stock should help ensure that your portfolio is not overly sensitive to market volatility. Beta is worth considering, but it’s also important to consider whether Travel Expert (Asia) Enterprises is growing earnings and revenue. You can take a look for yourself, below.

SEHK:1235 Income Statement, March 6th 2019

Does 1235’s size influence the expected beta?

Travel Expert (Asia) Enterprises is a noticeably small company, with a market capitalisation of HK$232m. Most companies this size are not always actively traded. Companies with market capitalisations around this size often show poor correlation with the broader market because market volatility is overshadowed by company specific events, or other factors. It’s worth checking to see how often shares are traded, because very small companies with very low beta values are often only thinly traded.

What this means for you:

The Travel Expert (Asia) Enterprises doesn’t usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Travel Expert (Asia) Enterprises’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 1235’s future growth? Take a look at our free research report of analyst consensus for 1235’s outlook.
  2. Past Track Record: Has 1235 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 1235’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how 1235 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.