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How Washington Federal, Inc. (NASDAQ:WAFD) Can Impact Your Portfolio Volatility

Simply Wall St

If you own shares in Washington Federal, Inc. (NASDAQ:WAFD) 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 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. 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.

View our latest analysis for Washington Federal

What does WAFD's beta value mean to investors?

Looking at the last five years, Washington Federal has a beta of 1.12. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. Based on this history, investors should be aware that Washington Federal 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 Washington Federal is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:WAFD Income Statement, December 24th 2019

Does WAFD's size influence the expected beta?

With a market capitalisation of US$2.9b, Washington Federal is a pretty big company, even by global standards. It is quite likely well known to very many investors. It takes a lot of money to influence the share price of large companies like this one. That makes it interesting to note that its share price has a history of sensitivity to market volatility. There might be some aspect of the business that means profits are leveraged to the economic cycle.

What this means for you:

Since Washington Federal has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether WAFD is a good investment for you, we also need to consider important company-specific fundamentals such as Washington Federal’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 WAFD’s future growth? Take a look at our free research report of analyst consensus for WAFD’s outlook.
  2. Past Track Record: Has WAFD 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 WAFD's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how WAFD 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.