Historical Volatility


An annualized one standard deviation of stock prices that measures how much past stock prices deviated from their average over a period of time.

Chart 1: Historical Volatility

How this indicator works

  • Historical Volatility does not measure direction; it measures how much the securities price is deviating from its average.
  • When a security’s Historical Volatility is rising, or higher than normal, it means prices are moving up and down farther/more quickly than usual and is an indication that something is expected to change, or has already changed, regarding the underlying security (i.e. uncertainty). You may want to research/monitor the security more closely.
  • When a security’s Historical Volatility is falling, things are returning back to normal (i.e. uncertainty has been removed).
Chart 2: Historical Volatility


HV = 1 Standard Deviation
The actual calculation is:

Calculation: Historical Volatility

R sub i through n = the continuously compounded return for each period
R avg = the average of all the daily returns (R sub i’s)

Technical analysis focuses on market action — specifically, volume and price. Technical analysis is only one approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.