Anyone researching Asian American Medical Group Limited (
ASX:AJJ
) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk,smith and wesson 454 casull 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 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. 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. 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.
Check out our latest analysis for Asian American Medical Group
What does AJJ’s beta value mean to investors?
Zooming in on Asian American Medical Group, we see it has a five year beta of 1.36. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market the market. If the past is any guide, we would expect that Asian American Medical Group 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 Asian American Medical Group fares in that regard, below.
ASX:AJJ Income Statement Export January 2nd 19
How does AJJ’s size impact its beta?
With a market capitalisation of AU$41m, Asian American Medical Group is a very small company by global standards. It is quite likely to be unknown to most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.
What this means for you:
Since Asian American Medical Group 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 Asian American Medical Group’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
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Financial Health
: Are AJJ’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our
financial health checks here
.
Past Track Record
: Has AJJ 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 AJJ’s historicals
for more clarity.
Other High-Performing Stocks
: Are there other stocks that provide better prospects with proven track records? Explore our
free list of these great stocks here
.
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
.
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