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Does The Stingray Group Inc. (TSE:RAY.A) Share Price Fall With The Market?

Simply Wall St

Anyone researching Stingray Group Inc. (TSE:RAY.A) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 are more sensitive to general market forces than others. 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. 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.

See our latest analysis for Stingray Group

What we can learn from RAY.A's beta value

Using history as a guide, we might surmise that the share price is likely to be influenced by market volatility going forward but it probably won't be particularly sensitive to it. 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 Stingray Group fares in that regard, below.

TSX:RAY.A Income Statement May 19th 2020

How does RAY.A's size impact its beta?

With a market capitalisation of CA$310m, Stingray Group is a very small company by global standards. It is quite likely to be unknown to most investors. Companies this small are usually more volatile than the market, whether or not that volatility is correlated. Therefore, it's a bit surprising to see that this stock 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 Stingray Group 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. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Stingray Group’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for RAY.A’s future growth? Take a look at our free research report of analyst consensus for RAY.A’s outlook.
  2. Past Track Record: Has RAY.A 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 RAY.A's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how RAY.A measures up against other companies on valuation. You could start with this free list of prospective options.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.