How Does Investing In Cross Country Healthcare, Inc. (NASDAQ:CCRN) Impact The Volatility Of Your Portfolio?

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If you’re interested in Cross Country Healthcare, Inc. (NASDAQ:CCRN), 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. 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. 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 below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

See our latest analysis for Cross Country Healthcare

What does CCRN’s beta value mean to investors?

Given that it has a beta of 1.14, we can surmise that the Cross Country Healthcare share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Cross Country Healthcare shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. 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 Cross Country Healthcare fares in that regard, below.

NASDAQGS:CCRN Income Statement Export February 7th 19
NASDAQGS:CCRN Income Statement Export February 7th 19

How does CCRN’s size impact its beta?

Cross Country Healthcare is a noticeably small company, with a market capitalisation of US$356m. Most companies this size are not always actively traded. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.

What this means for you:

Since Cross Country Healthcare 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 Cross Country Healthcare’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for CCRN’s future growth? Take a look at our free research report of analyst consensus for CCRN’s outlook.
  2. Past Track Record: Has CCRN 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 CCRN’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how CCRN measures up against other companies on valuation. You could start with this free list of prospective options.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.