U.S. Markets open in 1 hr 52 mins

What Kind Of Share Price Volatility Should You Expect For NBT Bancorp Inc. (NASDAQ:NBTB)?

Simply Wall St

If you own shares in NBT Bancorp Inc. (NASDAQ:NBTB) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated 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.

Check out our latest analysis for NBT Bancorp

What does NBTB's beta value mean to investors?

Zooming in on NBT Bancorp, we see it has a five year beta of 0.84. This is below 1, so historically its share price has been rather independent from the market. This means that -- if history is a guide -- buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). 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 NBT Bancorp fares in that regard, below.

NasdaqGS:NBTB Income Statement, December 6th 2019

Does NBTB's size influence the expected beta?

NBT Bancorp is a small company, but not tiny and little known. It has a market capitalisation of US$1.7b, which means it would be on the radar of intstitutional investors. Small companies often have a high beta value, but they can be heavily influenced by company-specific events. This might explain why this stock has a low beta.

What this means for you:

Since NBT Bancorp is not heavily influenced by market moves, its share price is probably far more dependend on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. In order to fully understand whether NBTB is a good investment for you, we also need to consider important company-specific fundamentals such as NBT Bancorp’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for NBTB’s future growth? Take a look at our free research report of analyst consensus for NBTB’s outlook.
  2. Past Track Record: Has NBTB 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 NBTB's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how NBTB 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.