If you are interested in investing in Community Health Systems Inc. (NYSE:$CYH) or currently own the stock, then you must understand its beta in order to successfully minimize risks to your portfolio. Specifically, there are two types of risks that affect the market value of a listed company such as CYH. The first being company-specific risk, which can be diversified away by investing in other companies in order to lower exposure. The second being market-risk, one that you can not diversify away since it is dictated by macroeconomic factors.
For instance, not all stocks are exposed to the same level of market risk; a beta indicator embodies such measurement. A stock with a beta greater than one is considered more sensitive to market-wide shocks as opposed to a stock that trades below the value of one.
Community Health Systems has a beta of 1.54, meaning that the percentage change in its stock value will be higher than the entire market in times of booms and busts. That means CYH may be a stock for investors with a portfolio mainly made up of low-beta stocks. During bullish sentiments, said investors will be able to reap more upside with high-beta stocks compared to the muted movements of low-beta holdings.
CYH has a market capitalization of $720.87 m USD- a small-cap stock which generally sees higher beta than similar companies of larger size. On the contrary, the company operates in the healthcare providers and services, which has seen to have low sensitivity to market-wide shocks. In the end, we should expect a high beta for the small-cap CYH but a low beta for the healthcare providers and services industry.
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