This chart shows Volatility for Sears Holdings Corporation, defined to be the price range as a portion of the average price:
So, to derive the Daily Volatility on 12/15/2010 of 1.4%, the price range for the day (0.98) was divided by the average price (68.39). 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.
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 SHLD has been 4% in contrast to the Average Quarterly Volatility of 37%.
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