Volatility Analysis for JP Morgan Chase
This chart shows Volatility for JP Morgan Chase, defined to be the price range as a portion of the average price:|
So, to derive the Daily Volatility on 11/11/2010 of 1.4%, the price range for the day (0.59) was divided by the average price (40.14). 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.
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 26 years, the Average Quarterly Volatility of JPM stock price has been 26% while the Average Daily Volatility has been 3%.
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 JPM Volatility Curve, the increase is not constant. |
This histogram is a frequency distribution of Daily Volatility, corresponding to the green points on the first chart on this page. |
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 JP Morgan Chase Volatility and Risk Behavior
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