Yahoo Finance Does The Cowen Inc. (NASDAQ:COWN) Share Price Fall With The Market?
If you're interested in Cowen Inc. (NASDAQ:COWN), 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 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. 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.
Check out our latest analysis for Cowen
What we can learn from COWN's beta value
Zooming in on Cowen, we see it has a five year beta of 1.45. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. Based on this history, investors should be aware that Cowen are likely to rise strongly in times of greed, but sell off in times of fear. 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 Cowen fares in that regard, below.
How does COWN's size impact its beta?
With a market capitalisation of US$303m, Cowen is a very small company by global standards. It is quite likely to be unknown to most investors. 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 Cowen tends to move 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 Cowen’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Financial Health: Are COWN’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 COWN 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 COWN'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.
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.
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. Thank you for reading.
