How Does Cypherpunk Holdings Inc. (CSE:HODL) Affect Your Portfolio Volatility?

Anyone researching Cypherpunk Holdings Inc. (CSE:HODL) 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. 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 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 are more sensitive to general market forces than others. 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.

See our latest analysis for Cypherpunk Holdings

What HODL’s beta value tells investors

Given that it has a beta of 1.52, we can surmise that the Cypherpunk Holdings share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Cypherpunk Holdings are likely to rise strongly in times of greed, but sell off in times of fear. 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 Cypherpunk Holdings fares in that regard, below.

CNSX:HODL Income Statement, January 6th 2020
CNSX:HODL Income Statement, January 6th 2020

Could HODL’s size cause it to be more volatile?

Cypherpunk Holdings is a noticeably small company, with a market capitalisation of CA$3.6m. Most companies this size are not always actively traded. It has a relatively high beta, suggesting it is fairly actively traded for a company of its size. Because it takes less capital to move the share price of a small company like this, when a stock this size is actively traded it is quite often more sensitive to market volatility than similar large companies.

What this means for you:

Since Cypherpunk Holdings 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. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Cypherpunk Holdings’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Past Track Record: Has HODL 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 HODL’s historicals for more clarity.
  2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.