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How TriState Capital Holdings, Inc. (NASDAQ:TSC) Can Impact Your Portfolio Volatility

Simply Wall St

If you own shares in TriState Capital Holdings, Inc. (NASDAQ:TSC) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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. 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.

Check out our latest analysis for TriState Capital Holdings

What does TSC's beta value mean to investors?

With a beta of 1.07, (which is quite close to 1) the share price of TriState Capital Holdings has historically been about as voltile as the broader market. If the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. 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 TriState Capital Holdings fares in that regard, below.

NasdaqGS:TSC Income Statement, September 10th 2019

How does TSC's size impact its beta?

TriState Capital Holdings is a small cap stock with a market capitalisation of US$608m. Most companies this size are actively traded. It takes less capital to move the share price of small companies, and they are also more impacted by company specific events, so it's a bit of a surprise that the beta is so close to the overall market.

What this means for you:

Since TriState Capital Holdings has a beta close to one, it will probably show a positive return when the market is moving up, based on history. If you're trying to generate better returns than the market, it would be worth thinking about other metrics such as cashflows, dividends and revenue growth might be a more useful guide to the future. In order to fully understand whether TSC is a good investment for you, we also need to consider important company-specific fundamentals such as TriState Capital Holdings’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 TSC’s future growth? Take a look at our free research report of analyst consensus for TSC’s outlook.
  2. Past Track Record: Has TSC 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 TSC's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how TSC 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.