Volatility Analysis for PetSmart, Inc
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 2/18/2011 of 1%, the price range for the day (0.44) was divided by the average price (41.61). 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.
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 18 years, the Average Quarterly Volatility of PETM stock price has been 36% while the Average Daily Volatility has been 4%.
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. As the timespan across which Volatility is measured increases, the Volatility is expected to increase. However, as seen in this plot of the PETM Volatility Curve, the increase is not constant. |
A frequency distribution of the green points on the first chart (the daily volatility) yields this histogram. |
In a similar vein, the Frequency Distribution of the Quarterly Volatility is plotted here. This is the distribution of the values plotted in purple on the top chart from this page. |
For Subscribers: Refined Analysis of PetSmart, Inc Volatility and Risk Behavior
Companies in the News:
|In the news, Friday, February 18, 2011: An unfavorable condition has developed with Aetna Inc., ticker symbol AET. Also, there are breaking events concerning Dollar Tree, Inc. (DLTR) and First Niagara Financial Group Inc. (FNFG)|
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