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How Xencor, Inc. (NASDAQ:XNCR) Can Impact Your Portfolio Volatility

Simply Wall St

If you're interested in Xencor, Inc. (NASDAQ:XNCR), 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. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a 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 are more sensitive to general market forces than others. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is 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.

See our latest analysis for Xencor

What does XNCR's beta value mean to investors?

Given that it has a beta of 1.37, we can surmise that the Xencor share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Xencor shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it's also important to consider whether Xencor is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGM:XNCR Income Statement, January 8th 2020
NasdaqGM:XNCR Income Statement, January 8th 2020

Could XNCR's size cause it to be more volatile?

With a market capitalisation of US$2.0b, Xencor 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 Xencor 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 XNCR is a good investment for you, we also need to consider important company-specific fundamentals such as Xencor’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 XNCR’s future growth? Take a look at our free research report of analyst consensus for XNCR’s outlook.

  2. Past Track Record: Has XNCR 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 XNCR's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how XNCR 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.