This chart shows Volatility for Coca Cola, defined to be the price range as a portion of the average price:
For instance, on 1/21/2011 the average price was 62.96 with a range of 0.48, indicating a Daily Volatility of 0.7%. 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.
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. Average Daily Volatility over the history of KO has been 2% in contrast to the Average Quarterly Volatility of 18%.
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