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If you’re interested in Troax Group AB (publ) (STO:TROAX), 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. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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. 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.
What does TROAX’s beta value mean to investors?
With a beta of 1.03, (which is quite close to 1) the share price of Troax Group has historically been about as voltile as the broader market. Using history as a guide, we might surmise that the share price is likely to be influenced by market voltility going forward but it probably won’t be particularly sensitive to it. Beta is worth considering, but it’s also important to consider whether Troax Group is growing earnings and revenue. You can take a look for yourself, below.
How does TROAX’s size impact its beta?
Troax Group is a small company, but not tiny and little known. It has a market capitalisation of kr6.0b, which means it would be on the radar of intstitutional investors. 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:
Troax Group has a beta value quite close to that of the overall market. That doesn’t tell us much on its own, so it is probably worth considering whether the company is growing, if you’re looking for stocks that will go up more than the overall market. In order to fully understand whether TROAX is a good investment for you, we also need to consider important company-specific fundamentals such as Troax Group’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for TROAX’s future growth? Take a look at our free research report of analyst consensus for TROAX’s outlook.
- Past Track Record: Has TROAX 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 TROAX’s historicals for more clarity.
- Other Interesting Stocks: It’s worth checking to see how TROAX 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 firstname.lastname@example.org. 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.