Chapter II: This survey looks at historical volatility of Matria HealthCare 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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This chart shows Volatility for Matria HealthCare, defined to be the price range as a portion of the average price: So, to derive the Daily Volatility on 5/16/2008 of 0%, the price range for the day (0.00) was divided by the average price (24.15). 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. Average Daily Volatility over the history of MATR has been 6% in contrast to the Average Quarterly Volatility of 49%. |
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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. From left to right, each position plots the Volatility associated with increasing intervals of time. The relationship between the length of time, and the expected change in price, is not linear, as is demonstrated by this chart. |
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A frequency distribution of the green points on the first chart (the daily volatility) yields this histogram. |
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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 MATR : |
| Thursday, March 18, 2010: We have news on MicroSoft, ticker symbol MSFT. Signs of an over-bought condition have become noticable. Also, there are breaking events concerning Mylan Inc. and Patterson Companies, Inc.. From the News Archive: (3/17/2010 ) Favorable events happened at LoJack Corp and ACM Income Fund. Meanwhile, bad news came from LSI Corporation and Sempra Energy. |