Want to participate in a short research study? Help us shape the future of investment tools and get a chance to win a $ 250 gift card!Anyone doing research on NORMA Group SE (FRA: NOEJ) might want to take into account the historical volatility of the share price. Volatility is considered a measure of risk in modern financial theory. Investors may think that volatility is divided into two main categories. The first category is company-specific volatility. This can be handled by limiting your exposure to a particular title. The other type, which can not be diversified, is the volatility of the entire market. All stocks in the market are exposed to this volatility, due to the fact that stock prices are correlated in an efficient market. Some stocks mimic market volatility, while others have moderate, exaggerated or uncorrelated price movements. Beta can be a useful tool for understanding how an equity is influenced by market risk (volatility). However, Warren Buffett said that "volatility is far from being risky" in his 2014 letter to investors. Thus, although useful, the beta is not the only measure to take into account. To use the beta version as an investor, you must first understand that the market is endowed with a beta version. A stock whose beta is less than one is less volatile than the market, is more volatile but not correlated to the market in general. In comparison, a stock with a beta greater than 1 tends to move in the same direction as the market in the long run, but with larger price changes. Discover our latest analyzes for the NORMA Group

What does the NOEJ beta value mean for investors?

As a result, the NORMA group has a beta of 1.06 over five years. This is close to 1, so the stock has always had a level of volatility similar to the market. Using history as a guide, it can be assumed that the stock price will likely be influenced by market volatility, but it is unlikely to be particularly sensitive to this trend. Many would argue that beta is useful for sizing positions, but that fundamental measures such as income and profits are more important in general. You can see the sales and results of the NORMA group in the image below.

DB: NOEJ Income Statement Export 12 February 19More

Could the size of NOEJ be more volatile?

The NORMA group is a small company, but not tiny and little known. It has a market capitalization of 1.3 billion euros, which means that it would be in the line of sight of institutional investors. Small businesses often have a high beta as equity prices can move with relatively low capital flows. It is interesting to note that this stock always has a beta value close to the beta value.

What does this mean for you?

Since the NORMA group has a beta version close to the beta, it will likely show a positive return as the market progresses, based on history. If you are trying to generate better returns than the market, it would be useful to think of other indicators such as cash flow, dividends and revenue growth could be a more useful guide for the future. The purpose of this article is to inform investors about beta values, but it is also important to consider important business-specific fundamentals, such as the financial health and performance of the NORMA Group. I strongly recommend that you dive deeper by considering the following points:

  1. Future prospects: What do well-informed industry analysts predict for NOEJ's future growth? Watch our free analyst consensus research report for NOEJ's perspectives.
  2. antecedents: Does NOEJ consistently perform well, regardless of the ups and downs of the market? Go into more detail in past performance analysis and take a look at free visual representations of NOEJ's histories to clarify more.
  3. Other interesting actions: It's worth checking how NOEJ compares to other companies in terms of valuation. You could start with that free list of possible options.

To help readers understand the past volatility of the financial market in the short term, our goal is to provide you with a long-term research analysis based solely on fundamental data. Please note that our analysis does not take into account the latest price sensitive business announcements. The author is an independent contributor and, at the time of publication, he did not hold any position on the mentioned actions. For errors that need to be corrected, please contact the publisher at the address editorial-team@simplywallst.com.