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). Daily Volatility (the daily range as a portion of the daily average price) is plotted in green. Blue is Weekly Volatility, which is the weekly range as a portion of the weekly average price. It is important to avoid confusing this with the weekly average of the daily volatility, which is a completely different concept.
The red plot shows the actual price. The remaining marks on the plot correspond to the Volatility measured across several time intervals.
According to academic theory, Volatility is exactly equal to Risk. But investors often make a distinction between these two concepts. The different character of Volatility as seen in different time frames, lends some support to the investor's view. During 27 years, the Average Quarterly Volatility of AAPL stock price has been 37% while the Average Daily Volatility has been 4%.
If you have ever seen a "yield curve" you should be able to understand the concept behind this "yield curve". Each Volatility Curve is a snapshot in time. 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. |
This histogram is a frequency distribution of Daily Volatility, corresponding to the green points on the first chart on this page. |
Similarly, the purple points on the top chart, the Quarterly Volatility Values, are subjected to frequency distribution here. |
For Subscribers: Refined Analysis of Apple Computer Volatility and Risk Behavior
Companies in the News:
|Friday, February 18, 2011: We have news on Fiserv, Inc., ticker symbol FISV. Signs of an over-bought condition have become noticable. Also, there are breaking events concerning Zimmer Holdings, Inc. and D.R. Horton, Inc.. |
From the News Archive: (2/18/2011 ) Favorable events happened at Robert Half International Inc. and Southwestern Energy Company. Meanwhile, bad news came from McCormick & Company, Incorporated and Reynolds American, Inc..
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