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This chart shows Volatility for Oracle, defined to be the price range as a portion of the average price: For instance, on 3/4/2010 the average price was 24.57 with a range of 0.58, indicating a Daily Volatility of 2.3%. 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 ORCL has been 4% in contrast to the Average Quarterly Volatility of 36%. |
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You may be familiar with the "yield curve" which shows how interest bearing yields vary according to term. Each Volatility Curve is a snapshot in time. As the timespan across which Volatility is measured increases, the Volatility is expected to increase. However, as seen in this plot of the ORCL 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 ORCL : |
| Wednesday, March 10, 2010: We have news on LoJack Corp, ticker symbol LOJN. A significant moving average event has happened. Also, there are breaking events concerning XTO Energy Inc. and American International Group, Inc.. From the News Archive: (3/9/2010 ) Bad news came from Titanium Metals Corporation, Exxon Mobil, Huntington Bancshares Incorporated, and Baxter International Inc.. |