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Volatility Analysis for MicroSoft

Chapter II: Risks associated with short and long period price changes can be understood through Volatility Analysis. Here the impact of the Volatility Curve on the potential profitability positions across different time spans is shown.

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MSFT:  Daily Volatility = Price Range as a percent of the daily average price.

Volatility is defined as the price range for a period, divided by the average price for the period:

For instance, on 3/12/2010 the average price was 29.21 with a range of 0.34, indicating a Daily Volatility of 1.1%. 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.

The red plot shows the actual price. 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 24 years, the Average Quarterly Volatility of MSFT stock price has been 27% while the Average Daily Volatility has been 3%.



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Volatility Curve of MicroSoft

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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Daily Volatility Histogram of MicroSoft

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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MSFT:  Quarterly Volatility Histogram

Similarly, the purple points on the top chart, the Quarterly Volatility Values, are subjected to frequency distribution here.

For Subscribers: Refined Analysis of MicroSoft Volatility and Risk Behavior

Refined Volatility Risk Analysis for MSFT :


Companies in the News:

In the news, Friday, March 12, 2010: An unfavorable condition has developed with Convergys Corporation, ticker symbol CVG. Also, there are breaking events concerning ConAgra Foods, Inc. (CAG) and Pre-Paid Legal (PPD)

More MSFT Technical Analysis Topics

MSFT Price Predictions

Support and Resistance Levels

Politics and Prices of MSFT

Japanese Candlestick Analysis

Momentum Investing Indicators

MSFT Classical Analysis of Time Series

MSFT Historical Volume

MSFT Seasonal Trends

Market Sentiment

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