Does Market Volatility Impact Hecla Mining Company's (NYSE:HL) Share Price?

If you're interested in Hecla Mining Company (NYSE:HL), 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. 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. 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. 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.

Check out our latest analysis for Hecla Mining

What we can learn from HL's beta value

Given that it has a beta of 1.30, we can surmise that the Hecla Mining share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Hecla Mining shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Hecla Mining's revenue and earnings in the image below.

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

Hecla Mining is a small company, but not tiny and little known. It has a market capitalisation of US$1.4b, which means it would be on the radar of intstitutional investors. It has a relatively high beta, which is not unusual among small-cap stocks. Because it takes less capital to move the share price of a smaller company, actively traded small-cap stocks often have a higher beta that a similar large-cap stock.

What this means for you:

Since Hecla Mining 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 Hecla Mining’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 HL’s future growth? Take a look at our free research report of analyst consensus for HL’s outlook.
2. Past Track Record: Has HL 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 HL's historicals for more clarity.
3. Other Interesting Stocks: It's worth checking to see how HL 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.

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