Yahoo Finance What Kind Of Share Price Volatility Should You Expect For Tredegar Corporation (NYSE:TG)?
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Anyone researching Tredegar Corporation (NYSE:TG) 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. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 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.
View our latest analysis for Tredegar
What TG's beta value tells investors
As it happens, Tredegar has a five year beta of 1.05. 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. 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 Tredegar's revenue and earnings in the image below.
Does TG's size influence the expected beta?
Tredegar is a small company, but not tiny and little known. It has a market capitalisation of US$516m, which means it would be on the radar of intstitutional 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 Tredegar 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 TG is a good investment for you, we also need to consider important company-specific fundamentals such as Tredegar’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 TG’s future growth? Take a look at our free research report of analyst consensus for TG’s outlook.
Past Track Record: Has TG 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 TG's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how TG 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.
