【popping from exhaust on deceleration】Does The Madras Fertilizers Limited (NSE:MADRASFERT) Share Price Tend To Follow The Market?

If you own shares in Madras Fertilizers Limited (

NSE:MADRASFERT

) then it’s worth thinking about how it contributes to the volatility of your portfolio,popping from exhaust on deceleration overall. In finance, Beta is a measure of volatility. 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 type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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. 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 Madras Fertilizers

What we can learn from MADRASFERT’s beta value

Madras Fertilizers has a five-year beta of 0.91. This is reasonably close to the market beta of 1, so the stock has in the past displayed similar levels of volatility to the overall 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 Madras Fertilizers fares in that regard, below.

NSEI:MADRASFERT Income Statement Export January 3rd 19

Does MADRASFERT’s size influence the expected beta?

Madras Fertilizers is a rather small company. It has a market capitalisation of ₹3.8b, which means it is probably under the radar of 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:

Madras Fertilizers has a beta value quite close to that of the overall market. That doesn’t tell us much on its own, so it is probably worth considering whether the company is growing, if you’re looking for stocks that will go up more than the overall market. In order to fully understand whether MADRASFERT is a good investment for you, we also need to consider important company-specific fundamentals such as Madras Fertilizers’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

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Financial Health

: Are MADRASFERT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our

financial health checks here

.

Past Track Record

: Has MADRASFERT 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 MADRASFERT’s historicals

for more clarity.

Other High-Performing Stocks

: Are there other stocks that provide better prospects with proven track records? Explore our

free list of these great stocks here

.

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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