This chart shows Volatility for Coca Cola, defined to be the price range as a portion of the average price:
For instance, on 1/29/2010 the average price was 54.42 with a range of 1.04, indicating a Daily Volatility of 1.9%. 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. 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.
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 30 years, the Average Quarterly Volatility of KO stock price has been 18% while the Average Daily Volatility has been 2%.
|
