How CatchMark Timber Trust, Inc. (NYSE:CTT) Can Impact Your Portfolio Volatility

Anyone researching CatchMark Timber Trust, Inc. (NYSE:CTT) 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

See our latest analysis for CatchMark Timber Trust

What CTT's beta value tells investors

Zooming in on CatchMark Timber Trust, we see it has a five year beta of 1.25. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, CatchMark Timber Trust shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it's also important to consider whether CatchMark Timber Trust is growing earnings and revenue. You can take a look for yourself, below.

How does CTT's size impact its beta?

CatchMark Timber Trust is a noticeably small company, with a market capitalisation of US$411m. Most companies this size are not always actively traded. 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 CatchMark Timber 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 CTT is a good investment for you, we also need to consider important company-specific fundamentals such as CatchMark Timber 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 CTT’s future growth? Take a look at our free research report of analyst consensus for CTT’s outlook.
2. Past Track Record: Has CTT 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 CTT's historicals for more clarity.
3. Other Interesting Stocks: It's worth checking to see how CTT measures up against other companies on valuation. You could start with this free list of prospective options.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.