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This chart shows Volatility for Wyeth, defined to be the price range as a portion of the average price: So, to derive the Daily Volatility on 10/15/2009 of 0.9%, the price range for the day (0.49) was divided by the average price (50.2). 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 27 years, the Average Quarterly Volatility of WYE stock price has been 18% while the Average Daily Volatility has been 2%. |
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You may be familiar with the "yield curve" which shows how interest bearing yields vary according to term. These Volatility Curves each apply to a discrete time interval. As the timespan across which Volatility is measured increases, the Volatility is expected to increase. 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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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 WYE : |
| Thursday, March 18, 2010: We have news on Goldman Sachs Group, Inc., ticker symbol GS. A significant moving average event has happened. Also, there are breaking events concerning LoJack Corp and PPL Corporation. From the News Archive: (3/17/2010 ) A favorable event happened at ACM Income Fund. Meanwhile, bad news came from Patterson Companies, Inc., Prudential Financial, Inc., and Walmart. |