Zacks.com Featured Expert Kevin Matras Highlights: Amerigroup Corporation, John H. Harland Company and Movie Gallery, Inc

Business Wire, June 14, 2006

CHICAGO -- Kevin Matras looks at how to minimize your portfolio's market risk and volatility by using the 'beta' measure. Stocks in this week's article are Amerigroup Corporation (NYSE:AGP), John H. Harland Company (NYSE:JH) and Movie Gallery, Inc. (NASDAQ:MOVI). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109

Screen of the Week written by Kevin Matras of Zacks Investment Research:

This week I want to talk about 'beta'. As investors try to protect themselves from 'market risk', a quick look at your stock's beta could help determine your co-movement measure.

First and foremost, 'beta' is a measure of an asset's risk relative to the 'market' (usually the S&P 500). (It's typically calculated as the 'performance a stock has experienced in the last five years as the S&P has moved up and down'.) A beta of 1.0 means the stock's relative volatility is equal to that of the market. Therefore, a beta that's greater than 1.0 is more volatile than the market, and a beta of less than 1.0 is less volatile. (It can also be explained as its excess movement or 'return'.) For instance, a beta of 1.5, will have one-and-a-half times the market's movement (50% more movement than the market). But if the market is plummeting, more than likely you're dropping even more than the market.

Take the following statistics for example. I ran two tests on the Research Wizard; one for stocks with betas half as much as the market and one with betas 50% more than the market. The results give a great illustration of beta or co-movement (a.k.a. covariance). Over the last four weeks, the S&P 500's percentage price change was down by approximately 3%. However, by focusing on stocks with betas of less than .5 (half the market's volatility) the average four-week percentage price change was only down 1.4%.

This is in stark contrast to stocks that had betas of one-and-a-half times the market (50% more market risk/volatility). The average four-week percentage price change on those stocks was 7.6%. (Both tests were applied to stocks with prices greater than or equal to $5 and average daily share volume of greater than or equal to 50,000.)

Of course, beta alone isn't a magic item, but used in conjunction with other proven stock-picking techniques can help you minimize unnecessary market risk and volatility.

Here's a screen I'm currently using to scan for good stocks with half the market's volatility.

Zacks Rank equal to 1
Beta  less than  .5  (half the volatility of the S&P 500)
Price  greater than or equal to  5
Avg. 20-day Volume  greater than or equal to 50,000

Currently, there are 20 stocks on this list. Here are three that look ready to breakout;

AGP    Amerigroup Corp.
JH     John H. Harland Company
MOVI   Movie Gallery, Inc.

Start using the beta indicator in some of your own screens and see if it doesn't help you smooth out your portfolio's volatility. Then test it with our backtesting feature.

Sign up now for your free trial to the Research Wizard and pick and choose from some of our proven, profitable strategies or put your own ideas to the test and start making better decisions today. http://at.zacks.com/?id=111

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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