If you own shares in Plaza Centers N.V. (

LON:PLAZ

) then it’s worth thinking about how it contributes to the volatility of your portfolio,rest area i-71/i-75 northbound florence ky overall. In finance, Beta is a measure of volatility. 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 other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.

Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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 Plaza Centers

What does PLAZ’s beta value mean to investors?

Looking at the last five years, Plaza Centers has a beta of 1.45. 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 Plaza Centers shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it’s also important to consider whether Plaza Centers is growing earnings and revenue. You can take a look for yourself, below.

LSE:PLAZ Income Statement Export January 2nd 19

Could PLAZ’s size cause it to be more volatile?

With a market capitalisation of UK£2.4m, Plaza Centers is a very small company by global standards. It is quite likely to be unknown to most investors. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.

What this means for you:

Beta only tells us that the Plaza Centers share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there’s plenty more to learn. In order to fully understand whether PLAZ is a good investment for you, we also need to consider important company-specific fundamentals such as Plaza Centers’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

Story continues

Financial Health

: Are PLAZ’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 PLAZ 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 PLAZ’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

[email protected]

.

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