Yahoo Finance Before You Buy Collerina Cobalt Limited’s (ASX:CLL), Consider This
If you’re interested in Collerina Cobalt Limited (ASX:CLL), 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. Modern finance theory considers volatility to be a measure of risk, 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 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. 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. 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.
Check out our latest analysis for Collerina Cobalt
What CLL’s beta value tells investors
With a beta of 0.98, (which is quite close to 1) the share price of Collerina Cobalt has historically been about as voltile as the broader market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. 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 Collerina Cobalt’s revenue and earnings in the image below.
Could CLL’s size cause it to be more volatile?
With a market capitalisation of AU$61.5m, Collerina Cobalt is a very small company by global standards. It is quite likely to be unknown to most investors. It doesn’t take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it has a beta value so close to the overall market.
What this means for you:
It is probable that there is a link between the share price of Collerina Cobalt and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that’s your game, metrics such as revenue, earnings and cash flow will be more useful. In order to fully understand whether CLL is a good investment for you, we also need to consider important company-specific fundamentals such as Collerina Cobalt’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Financial Health: Are CLL’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 CLL 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 CLL’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 editorial-team@simplywallst.com.
