Yahoo Finance What Kind Of Share Price Volatility Should You Expect For Brilliance China Automotive Holdings Limited (HKG:1114)?
If you're interested in Brilliance China Automotive Holdings Limited (HKG:1114), 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. 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 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 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.
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Check out our latest analysis for Brilliance China Automotive Holdings
What does 1114's beta value mean to investors?
Zooming in on Brilliance China Automotive Holdings, we see it has a five year beta of 1.97. 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, Brilliance China Automotive Holdings 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 Brilliance China Automotive Holdings's revenue and earnings in the image below.
How does 1114's size impact its beta?
Brilliance China Automotive Holdings is a reasonably big company, with a market capitalisation of HK$37b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It takes a lot of money to influence the share price of large companies like this one. That makes it interesting to note that its share price has a history of sensitivity to market volatility. There might be some aspect of the business that means profits are leveraged to the economic cycle.
What this means for you:
Since Brilliance China Automotive Holdings 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. In order to fully understand whether 1114 is a good investment for you, we also need to consider important company-specific fundamentals such as Brilliance China Automotive Holdings’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for 1114’s future growth? Take a look at our free research report of analyst consensus for 1114’s outlook.
Past Track Record: Has 1114 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 1114's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how 1114 measures up against other companies on valuation. You could start with this free list of prospective options.
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.
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. Thank you for reading.
