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Does NOTE AB (publ) (STO:NOTE) Have A Particularly Volatile Share Price?

Anyone researching NOTE AB (publ) (STO:NOTE) might want to consider the historical volatility of the share price. 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 are more sensitive to general market forces than others. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is one. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

Check out our latest analysis for NOTE

What we can learn from NOTE's beta value

Given that it has a beta of 1.36, we can surmise that the NOTE share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that NOTE shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see NOTE's revenue and earnings in the image below.

OM:NOTE Income Statement, April 11th 2019
OM:NOTE Income Statement, April 11th 2019

Does NOTE's size influence the expected beta?

NOTE is a noticeably small company, with a market capitalisation of kr717m. Most companies this size are not always actively traded. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Since NOTE 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 NOTE is a good investment for you, we also need to consider important company-specific fundamentals such as NOTE’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

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  1. Future Outlook: What are well-informed industry analysts predicting for NOTE’s future growth? Take a look at our free research report of analyst consensus for NOTE’s outlook.

  2. Past Track Record: Has NOTE 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 NOTE's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how NOTE measures up against other companies on valuation. You could start with this free list of prospective options.

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.