Volatility Analysis for Apple Computer
Volatility is defined as the price range for a period, divided by the average price for the period:|
So, to derive the Daily Volatility on 2/15/2011 of 0.6%, the price range for the day (2.42) was divided by the average price (358.76). The Daily Volatility is obtained by dividing the daily range by the daily average. A longer Volatility period such as Weekly Volatility is obtained by dividing the weekly price range by the weekly mean price. This is a different concept from the weekly average of daily volatility.
The red plot shows the actual price. The remaining marks on the plot correspond to the Volatility measured across several time intervals.
Investors often make a distinction between the concept of Volatility, and the concept of Risk. Academics define them to be exactly equivalent, but as can be seen here, there is good reason to distinguish between the levels of volatility or risk experienced across different time frames. Average Daily Volatility over the history of AAPL has been 4% in contrast to the Average Quarterly Volatility of 37%.
You may be familiar with the "yield curve" which shows how interest bearing yields vary according to term. These Volatility Curves each apply to a discrete time interval. As the timespan across which Volatility is measured increases, the Volatility is expected to increase. The relationship between the length of time, and the expected change in price, is not linear, as is demonstrated by this chart. |
A frequency distribution of the green points on the first chart (the daily volatility) yields this histogram. |
In a similar vein, the Frequency Distribution of the Quarterly Volatility is plotted here. This is the distribution of the values plotted in purple on the top chart from this page. |
For Subscribers: Refined Analysis of Apple Computer Volatility and Risk Behavior
Companies in the News:
|In the news, Friday, February 18, 2011: An unfavorable condition has developed with Aetna Inc., ticker symbol AET. Also, there are breaking events concerning Dollar Tree, Inc. (DLTR) and First Niagara Financial Group Inc. (FNFG)|
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