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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 3/2/2010 of 1%, the price range for the day (0.43) was divided by the average price (42.63). 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. 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 GAS has been 2% in contrast to the Average Quarterly Volatility of 17%. |
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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. However, as seen in this plot of the GAS Volatility Curve, the increase is not constant. |
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This histogram is a frequency distribution of Daily Volatility, corresponding to the green points on the first chart on this page. |
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Similarly, the purple points on the top chart, the Quarterly Volatility Values, are subjected to frequency distribution here. |
Refined Volatility Risk Analysis for GAS : |
| Friday, March 12, 2010: We have news on ConAgra Foods, Inc., ticker symbol CAG. Signs of an over-bought condition have become noticable. Also, there are breaking events concerning Texas Instruments Incorporated and Convergys Corporation. From the News Archive: (3/11/2010 ) A favorable event happened at Amgen, Inc.. Meanwhile, bad news came from Coach, Inc., Fluor Corporation (NEW), and Automatic Data Processing. |