Chapter II: This survey looks at historical volatility of LoJack Corp prices. The risks associated with long and short term positions can be evaluated according to projected shapes of the Volatility Curve. |
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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 3/17/2010 of 2.3%, the price range for the day (0.10) was divided by the average price (4.2). 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. 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 17 years, the Average Quarterly Volatility of LOJN stock price has been 35% while the Average Daily Volatility has been 5%. |
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If you have ever seen a "yield curve" you should be able to understand the concept behind this "yield curve". 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. However, as seen in this plot of the LOJN 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 LOJN : |
| Wednesday, March 17, 2010: We have news on CIGNA Corporation, ticker symbol CI. Signs of an over-bought condition have become noticable. Also, there are breaking events concerning Prudential Financial, Inc. and Patterson Companies, Inc.. From the News Archive: (3/17/2010 ) Favorable events happened at LoJack Corp and Harley-Davidson, Inc.. Meanwhile, bad news came from General Electric and Nucor Corporation. |