Volatility
This is a statistical measure of volatility called the coefficient of variation. It measures the standard deviation of closing price from its simple moving average.
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Volatility is normally used to measure the risk profile of managed funds.
Example
Dow Jones Industrial Average with
52 week Volatility.
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Setup
The default period is 125 days. To alter the default settings - Edit Indicator Settings.
See Indicator Panel for directions on how to set up an indicator.
Formula
Volatility = standard deviation of closing price [for n periods] / average closing price [for n periods]
n periods is normally taken for 1 to 5 years.
Standard Deviation
For the more technically-minded, Standard Deviation is the basic statistical measure of the dispersion of a population of data observations around a mean. Referred to as STD (or by the Greek symbol sigma) it is the square root of the Variance.
To calculate the Variance:
- Measure the deviation of each data point from the Mean (the average of the entire population).
- Square the deviations.
- Sum the squared deviations.
- Divide the sum by the total number of observations.
STD is calculated as the square root of the Variance.
