What is HV?
Measures how much a stock's price fluctuates over time, based on standard deviation of returns.
Think of it like this
Like measuring how bumpy a road is - higher volatility means a wilder ride with bigger ups and downs.
Formula
HV = StdDev of Daily Returns × √252 (annualized)- Daily Returns: Percentage change from day to day
- Standard Deviation: Measure of return dispersion
Why it matters
- Helps assess risk in a position
- Higher volatility = higher risk and potential reward
- Important for options pricing
- Compare to implied volatility for trading edges
What's a good value?
< 20%
Low
Stable, defensive stock
20-40%
Moderate
Typical for most stocks
40-60%
High
More risk, growth stocks
> 60%
Very High
Speculative, small caps
Real-world example
A stock with 30% annualized volatility might move about 2% on a typical day.
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