Yahoo Finance Before You Buy Amarc Resources Ltd. (CVE:AHR), Consider Its Volatility
If you own shares in Amarc Resources Ltd. (CVE:AHR) 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 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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.
View our latest analysis for Amarc Resources
What does AHR's beta value mean to investors?
Looking at the last five years, Amarc Resources has a beta of 1.58. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. Based on this history, investors should be aware that Amarc Resources 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 Amarc Resources is growing earnings and revenue. You can take a look for yourself, below.
Does AHR's size influence the expected beta?
With a market capitalisation of CA$5.3m, Amarc Resources 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:
Since Amarc Resources 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 Amarc Resources’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
Financial Health: Are AHR’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 AHR 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 AHR'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.
