How to Identify Small Cap High Volatility Stocks

How to Identify Small Cap High Volatility Stocks
••• Comstock/Comstock/Getty Images

Small cap stocks with high volatility offer the potential for big gains but are not for the faint of heart. High volatility means a stock experiences much bigger price swings than the average stock. A high volatility stock can rise fast but can fall just as quick. “Small cap” refers to the size of a company’s market capitalization, or total common stock value. A small cap stock’s market capitalization is typically less than $1 billion, although this definition varies. To identify these stocks for possible investment, you can use a free online stock screener, a tool that generates a list of stocks based on your specific criteria.

Visit any financial website that provides a free stock screener, such as Nasdaq, CNBC or The Motley Fool.

Find the market capitalization, or “market cap,” parameter among the screener’s criteria. If necessary, click the parameter’s name or a box next to it to activate it to use in your screen.

Select “$1 billion” as the maximum market capitalization. This instructs the screener to identify only stocks with market capitalizations of up to $1 billion, which includes only small cap stocks.

Find the “beta” parameter among the screener’s criteria. Click the parameter or an adjacent box to activate it, if required.

Select “2.5” as the minimum beta. This commands the screener to identify only stocks with betas of at least 2.5. Beta is a metric that measures a stock’s volatility relative to the overall stock market, which has a beta of 1. While any stock with a beta that’s greater than 1 is more volatile than the market, stocks with betas of 2.5 and greater are highly volatile.

Click “Run Screen,” “View Results” or a similar button to run the screen. The screener identifies stocks in its database that match your criteria and displays them in a table. In this case, the stocks have market caps of $1 billion or less and betas greater than 2.5 -- all small-cap, high volatility stocks. The table shows one stock per row and shows each stock’s market cap and beta in columns.

Click the “Market Cap” column heading to sort the list by company size, or click the “Beta” column heading to sort by volatility. The highest beta stocks have the highest volatility.

Click the name of any stock to view more information about it for further research.


  • Small-cap stocks typically have a shorter track record than larger, more established companies. While some small caps might become the next big major corporation, others might fail to stay in business. Always fully research a stock before investing.