Yahoo Finance Is Washington Prime Group Inc. (NYSE:WPG) A Volatile Stock?
If you’re interested in Washington Prime Group Inc. (NYSE:WPG), 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. 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. 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.
See our latest analysis for Washington Prime Group
What WPG’s beta value tells investors
As it happens, Washington Prime Group has a five year beta of 0.97. This is fairly close to 1, so the stock has historically shown a somewhat similar level of volatility as the market. Using history as a guide, we might surmise that the share price is likely to be influenced by market voltility 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 Washington Prime Group fares in that regard, below.
How does WPG’s size impact its beta?
With a market capitalisation of US$1.2b, Washington Prime Group is a small cap stock. However, it is big enough to catch the attention of professional investors. It takes less capital to move the share price of small companies, and they are also more impacted by company specific events, so it’s a bit of a surprise that the beta is so close to the overall market.
What this means for you:
Since Washington Prime Group has a beta close to one, it will probably show a positive return when the market is moving up, based on history. If you’re trying to generate better returns than the market, it would be worth thinking about other metrics such as cashflows, dividends and revenue growth might be a more useful guide to the future. In order to fully understand whether WPG is a good investment for you, we also need to consider important company-specific fundamentals such as Washington Prime Group’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for WPG’s future growth? Take a look at our free research report of analyst consensus for WPG’s outlook.
Past Track Record: Has WPG 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 WPG’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how WPG measures up against other companies on valuation. You could start with this free list of prospective options.
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.
