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##### Asked by: Suying Robertson

personal finance options# How is stock volatility calculated?

Last Updated: 28th April, 2020

**volatility**is

**calculated**as the squareroot of the variance, S. This can be

**calculated**asV=sqrt(S). This "square root" measures the deviation of a set ofreturns (perhaps daily, weekly or monthly returns) from their mean.It is also called the Root Mean Square, or RMS, of the deviationsfrom the mean return.

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Also to know is, what is the volatility of a stock?

**Volatility** ismeasured using the standard deviation in price change of a**stock's** price against its price at any given time, ormeasured as the variance of the change of the **stock** priceagainst a benchmark, for example a market index. A commonly quotedmeasure of **volatility** is a **stock's** beta.

Subsequently, question is, what is the best measure of volatility? Where standard deviation **measures** a security'sprice movements compared to its average over time, beta**measures** a security's **volatility** relative to that ofthe wider market. A beta of 1 means the security has**volatility** that mirrors the degree and direction of themarket as a whole.

Thereof, how do you calculate annual volatility?

Annualizing **volatility** To present this **volatility** in annualized terms,we simply need to multiply our daily standard deviation by thesquare root of 252. This assumes there are 252 trading days in agiven year. The **formula** for square root in Excel is =SQRT().In our example, 1.73% times the square root of 252 is27.4%.

What is a good volatility for stock?

**Volatility** From the Investor's Point of View.**Stock** market **volatility** is arguably one of the mostmisunderstood concepts in investing. Simply put, **volatility**is the range of price change a security experiences over a givenperiod of time. If the price stays relatively stable, the securityhas low **volatility**.