"How to" Article Format

How to Measure a Stock's Volatility (Title In Bold)

A Stock's volatility also called the change in price is best measured by its Standard Deviation over a period of time. In general the Measure of a Stock's Volatility varies from the average value over a measurement period. The volatility varies such that if the price variation is on a day to day basis, the volatility will be high and if the price variation is low on a day to day basis the volatility will also be low. (Introduction of 5-6 lines)

Market volatility is also defined as the rate in which a security changes and the market security is measured by watching the daily change in market price. Volatility is one of the most important things to be kept in mind while investing the capital in a mutual fund or hedge fund. The volatility describes both the Hike and downturn in the market. But usually the major decrease in price is generally looked up. Whenever a particular stock is moving up and down in share price, the stock is known to have a high level of volatility. Another important thing is that, if a share price stays comparatively the same for a long period of time then it is assured that it has low volatility. (More on the Body 6-7 Lines)

Now the question is how can we calculate or measure the Stocks Volatility?

The Stock's Volatility can be measured by calculating its standard deviation explained in the following steps. The following steps are to be performed for calculating a 20-period standard deviation.

Things you’ll need(List of things that you ll need)

• A Simple Calculator
• Paper Sheet
• Pen/Pencil

Step.1 Calculating the Average(Step by step guide with a step title)

Calculate the simple average of the closing price or mean of the closing price using the calculator. The simple average or mean for 20 days is calculated by adding all the 20 closing prices and then dividing the sum by 20.The value obtained by performing this calculation is known as the variance of the stock.

(One Line gap after each step)

Step.2 Evaluating the Deviation

After calculating the variance, subtract the average closing price from the actual closing price for each period. This method will help us to calculate the accurate deviation for each period.

Step.3 Square the Deviation

Next you need to square the deviation of each period.

Step.4 Finding the Sum of the Deviation

Now add the squared deviations obtained from step 3 to obtain the sum of the squared deviations.

Step.5 Calculating the Standard Deviation

In this step you need to divide the sum of the squared deviations by the number of periods to obtain the standard deviation value. Usually the standard deviation value will be equal to the square root of that number.

The Above steps help to Measure a Stock's Volatility and it helps the business to be in a secure and good position. Even though this has discouraged many investors, it is essential for all investors to understand a stock’s volatility to get through the ups and downs in the market on a long term basis. (Conclusion Of 2 - 3 lines)