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This chart shows Volatility for United States Steel Corporation, defined to be the price range as a portion of the average price: For instance, on 3/10/2010 the average price was 60.19 with a range of 1.80, indicating a Daily Volatility of 2.9%. 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. It is important to avoid confusing this with the weekly average of the daily volatility, which is a completely different concept. For reference, the price is plotted in red. 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 19 years, the Average Quarterly Volatility of X stock price has been 35% while the Average Daily Volatility has been 3%. |
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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. 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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A frequency distribution of the green points on the first chart (the daily volatility) yields this histogram. |
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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. |
Refined Volatility Risk Analysis for X : |
| Wednesday, March 10, 2010: We have news on Philip Morris, ticker symbol MO. Some signs of an over-sold condition have become evident. Also, there are breaking events concerning Omnicom Group Inc. and Vulcan Materials Company. From the News Archive: (3/10/2010 ) Bad news came from Carnival Corporation, PNC Financial Services, CenterPoint Energy, Inc., and NiSource Inc.. |