【mods for 1.8.8】Does The DaChan Food (Asia) Limited (HKG:3999) Share Price Fall With The Market?

If you own shares in DaChan Food (Asia) Limited (

HKG:3999

) then it’s worth thinking about how it contributes to the volatility of your portfolio,mods for 1.8.8 overall. In finance, Beta is a measure of volatility. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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.

Check out our latest analysis for DaChan Food (Asia)

What does 3999’s beta value mean to investors?

With a beta of 1.06, (which is quite close to 1) the share price of DaChan Food (Asia) has historically been about as voltile as the broader 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 DaChan Food (Asia) fares in that regard, below.

SEHK:3999 Income Statement Export January 1st 19

Does 3999’s size influence the expected beta?

With a market capitalisation of HK$406m, DaChan Food (Asia) is a very small company by global standards. It is quite likely to be unknown to most investors. It doesn’t take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it 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 DaChan Food (Asia) 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. In order to fully understand whether 3999 is a good investment for you, we also need to consider important company-specific fundamentals such as DaChan Food (Asia)’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

Story continues

Future Outlook

: What are well-informed industry analysts predicting for 3999’s future growth? Take a look at our

free research report of analyst consensus

for 3999’s outlook.

Past Track Record

: Has 3999 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 3999’s historicals

for more clarity.

Other Interesting Stocks

: It’s worth checking to see how 3999 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

[email protected]

.

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