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Anyone researching Filta Group Holdings plc (LON:FLTA) 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 other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient 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. 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.
What we can learn from FLTA’s beta value
Given that it has a beta of 1.48, we can surmise that the Filta Group Holdings share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Filta Group Holdings 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 Filta Group Holdings is growing earnings and revenue. You can take a look for yourself, below.
Could FLTA’s size cause it to be more volatile?
Filta Group Holdings is a rather small company. It has a market capitalisation of UK£55m, which means it is probably under the radar of most investors. 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 Filta Group Holdings tends to moves up when the market is going up, and down when it’s going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Filta Group Holdings’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
- Future Outlook: What are well-informed industry analysts predicting for FLTA’s future growth? Take a look at our free research report of analyst consensus for FLTA’s outlook.
- Past Track Record: Has FLTA 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 FLTA’s historicals for more clarity.
- Other Interesting Stocks: It’s worth checking to see how FLTA 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 email@example.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.