Volatility Analysis for Apple Computer
Volatility is defined as the price range for a period, divided by the average price for the period:|
For instance, on 2/15/2011 the average price was 358.76 with a range of 2.42, indicating a Daily Volatility of 0.6%. 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. It is important to avoid confusing this with the weekly average of the daily volatility, which is a completely different concept.
For reference, the price is plotted in red. Volatility, as measured through various intervals, ( Daily, Weekly, Monthly and Quarterly) is plotted according to color.
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. During 27 years, the Average Quarterly Volatility of AAPL stock price has been 37% while the Average Daily Volatility has been 4%.
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. |
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
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