Volatility is defined as the price range for a period, divided by the average price for the period:
For instance, on 2/18/2011 the average price was 34.41 with a range of 0.46, indicating a Daily Volatility of 1.3%. 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. This is a different concept from the weekly average of daily volatility.
For reference, the price is plotted in red. 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 RAI has been 2% in contrast to the Average Quarterly Volatility of 23%.
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