CorEnergy Infrastructure Trust, Inc. (NYSE:CORR): What Does Its Beta Value Mean For Your Portfolio?

Anyone researching CorEnergy Infrastructure Trust, Inc. (NYSE:CORR) 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. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.

Some stocks are more sensitive to general market forces than others. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said ‘volatility is far from synonymous with risk’ in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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 CorEnergy Infrastructure Trust

What we can learn from CORR’s beta value

Looking at the last five years, CorEnergy Infrastructure Trust has a beta of 1.37. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that CorEnergy Infrastructure Trust shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. 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 CorEnergy Infrastructure Trust fares in that regard, below.

NYSE:CORR Income Statement, December 23rd 2019
NYSE:CORR Income Statement, December 23rd 2019

How does CORR’s size impact its beta?

CorEnergy Infrastructure Trust is a small company, but not tiny and little known. It has a market capitalisation of US$601m, which means it would be on the radar of intstitutional investors. It’s not particularly surprising that it has a higher beta than the overall market. That’s because it takes less money to influence the share price of a smaller company, than a bigger company.

What this means for you:

Since CorEnergy Infrastructure Trust 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. In order to fully understand whether CORR is a good investment for you, we also need to consider important company-specific fundamentals such as CorEnergy Infrastructure Trust’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 CORR’s future growth? Take a look at our free research report of analyst consensus for CORR’s outlook.
  2. Past Track Record: Has CORR 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 CORR’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how CORR 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.

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.