If you’re interested in QEP Resources,thera tears contact lens Inc. (

NYSE:QEP

), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the 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.

See our latest analysis for QEP Resources

What we can learn from QEP’s beta value

Zooming in on QEP Resources, we see it has a five year beta of 1.38. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market the market. If the past is any guide, we would expect that QEP Resources shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. 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 QEP Resources fares in that regard, below.

NYSE:QEP Income Statement Export January 2nd 19

Does QEP’s size influence the expected beta?

QEP Resources is a small company, but not tiny and little known. It has a market capitalisation of US$1.3b, which means it would be on the radar of intstitutional investors. It is quite common to see a small-cap stock with a beta greater than one. In part, that’s because relatively few investors can influence the price of a smaller company, compared to a large company.

What this means for you:

Since QEP Resources 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 QEP is a good investment for you, we also need to consider important company-specific fundamentals such as QEP Resources’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 QEP’s future growth? Take a look at our

free research report of analyst consensus

for QEP’s outlook.

Past Track Record

: Has QEP 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 QEP’s historicals

for more clarity.

Other Interesting Stocks

: It’s worth checking to see how QEP 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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