What Kind Of Share Price Volatility Should You Expect For United Insurance Holdings Corp. (NASDAQ:UIHC)?

Simply Wall St

Anyone researching United Insurance Holdings Corp. (NASDAQ:UIHC) 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 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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. 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.

View our latest analysis for United Insurance Holdings

What we can learn from UIHC's beta value

Looking at the last five years, United Insurance Holdings has a beta of 1.18. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that United Insurance Holdings shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether United Insurance Holdings is growing earnings and revenue. You can take a look for yourself, below.

NasdaqCM:UIHC Income Statement, January 17th 2020

Does UIHC's size influence the expected beta?

United Insurance Holdings is a noticeably small company, with a market capitalisation of US$468m. Most companies this size are not always actively traded. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Since United Insurance Holdings has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether UIHC is a good investment for you, we also need to consider important company-specific fundamentals such as United Insurance Holdings’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for UIHC’s future growth? Take a look at our free research report of analyst consensus for UIHC’s outlook.
  2. Past Track Record: Has UIHC 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 UIHC's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how UIHC measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.