Volatility
The degree to which an asset's returns vary around their average, usually measured as annualised standard deviation.
Formula
Annualised Volatility = Standard Deviation of Daily Returns x square root of 252
Unit
%
In depth
Volatility measures dispersion in both directions, so a stock that rises sharply is exactly as volatile as one that falls sharply — which is why equating volatility with danger is imprecise. It is the standard proxy for risk in finance because it is computable and additive across a portfolio, not because it captures what investors actually fear. Volatility clusters: quiet periods follow quiet periods and turbulent ones follow turbulence, which makes it more forecastable than returns. It also scales with the square root of time, so monthly volatility is not twelve times daily volatility.
Worked example
Daily returns with a standard deviation of 1.2% annualise to 1.2 x 15.87 = 19.0%. Roughly two-thirds of annual outcomes would fall within one standard deviation of the mean if returns were normal, which they are not.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Volatility” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.