Low Volatility Stocks Strategy: Beta, Performance and Returns Analysis

Some stocks, and indeed some stock market sectors, are known for their relatively stable prices and little intraday fluctuations. Some traders and investors prefer such stocks, as they make use of low volatility stocks strategy. Want to know more about the low volatility stock strategy?

Low volatility stock strategy involves investing in stocks with lower volatility or price fluctuation than the overall market. These stocks may provide more consistent returns and less risk, and in they have also proven to offer a better return than high volatility returns (in the long run). In the short run, however, they might be better which is why they may not appeal to day traders and swing traders.

In this post, we look at low volatility stocks strategy, and we end the article with a backtest of this factor investing strategy.

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Introduction to Low Volatility Stocks (Low Beta)

Low volatility stocks have relatively stable prices and experience less price fluctuation than the overall market. These stocks are often considered less risky investments, as they are less likely to experience significant declines in value. However, they may also provide lower returns compared to higher volatility stocks, depending on the time horizon.

Low volatility stocks can come from various sectors and industries, such as consumer staples, utilities, and healthcare. By definition, low volatility stocks are stocks that have a low beta — the measure of a stock’s volatility relative to the overall market. A beta of less than 1 indicates that a stock is less volatile than the market, while a beta greater than 1 indicates more volatile.

We have previously both covered utility and consumer s