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Volatility

How much a price moves around, usually stated as annualised standard deviation. It is a measure of variability, not of danger, though the two often coincide.

Updated 2026-09-05

Volatility is how much a price moves around, usually expressed as annualised standard deviation of returns. It measures variability, not direction and not danger.

Treating it as a synonym for risk is the standard criticism of modern portfolio theory, and it is a fair one. A stable business whose share price wobbles is not obviously riskier to a twenty-year holder than a fragile business whose price is quiet. Permanent loss of capital is the risk that matters; volatility is what is measurable.

Angie uses it anyway, through beta, because it is reproducible without judgement. It also bounds it hard, floored at 0.30 and capped at 1.6, which is an admission that the raw measurement is not always meaningful.

See also

  • Beta — How much the stock moves relative to the S&P 500. A beta of 1.0 moves with the market, higher is more volatile, and higher volatility raises the discount rate.
  • ATR — The typical distance a price travels in a day. Used to size stops in the stock's own terms, so a volatile name gets more room than a quiet one.
  • Implied volatility — How much movement the option's price implies the market expects. It is not a forecast anyone made, it is what falls out of the price when you solve backwards.
  • Sharpe ratio — Return per unit of volatility. It asks how much turbulence you endured for the gain, so a smoother path scores better than a wild one that ends up level with it.

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Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.

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