Yahoo Finance One Thing To Remember About The IPB Petroleum Limited (ASX:IPB) Share Price
If you own shares in IPB Petroleum Limited (ASX:IPB) then it's worth thinking about how it contributes to the volatility of your portfolio, 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. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is 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 IPB Petroleum
What does IPB's beta value mean to investors?
Zooming in on IPB Petroleum, we see it has a five year beta of 1.71. 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 IPB Petroleum are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it's also important to consider whether IPB Petroleum is growing earnings and revenue. You can take a look for yourself, below.
Could IPB's size cause it to be more volatile?
IPB Petroleum is a noticeably small company, with a market capitalisation of AU$5.5m. Most companies this size are not always actively traded. 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:
Since IPB Petroleum 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 IPB is a good investment for you, we also need to consider important company-specific fundamentals such as IPB Petroleum’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
Past Track Record: Has IPB 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 IPB'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.
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.
