Volatility Archives - 3i Financial https://www.3ifinancial.com/tag/volatility/ Home To Your Insurance and Investment Needs Fri, 16 Jul 2021 16:39:38 +0000 en-CA hourly 1 https://wordpress.org/?v=6.8.5 https://www.3ifinancial.com/wp-content/uploads/2021/06/cropped-Logo_RGB-32x32.png Volatility Archives - 3i Financial https://www.3ifinancial.com/tag/volatility/ 32 32 Volatility https://www.3ifinancial.com/volatility/ Thu, 08 Jul 2021 15:00:00 +0000 https://test.3ifinancial.com/?p=2319 What is Volatility? Volatility is a measure of the rate at which price of a security increases or decreases for a given set of returns. The market will be more volatile if the price fluctuates more frequently. It indicates the risk and is a normal part of investing. Use the average price to find the […]

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What is Volatility?

Volatility is a measure of the rate at which price of a security increases or decreases for a given set of returns. The market will be more volatile if the price fluctuates more frequently. It indicates the risk and is a normal part of investing.

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Use the average price to find the difference between the prices.

  1. 15-14=1
  2. 11-14=-3
  3. 13-14=-1
  4. 17-14=3
  5. 14-14=0

Square the differences and add the total.

  1. (1)^2=1
  2. (-3)^2=9
  3. (-1)^2=1
  4. (3)^2=9
  5. (0)^2=0                                                         

Add Total 1+9+1+9+0=20

How to Calculate Volatility?

Stock price of  XYZ Inc.

Day 1. $15   Day 2. $11   Day 3. $13   Day 4. $17   Day 5. $14

Follow our Step Method.

Find the average between the prices.

  1. ($15+$11+$13+$17+$14)/5=$14
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Find the population variance and standard deviation

  1. Variance (Population Standard deviation)

20/5=4

  1. Population Standard deviation

Square root the Variance (Population Standard deviation) = Square Root (4)=2

Therefore the stock price deviates from an average of $2.

Source: Corporate Finance Institute

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