Overview
Volatility measures the standard deviation of periodic returns and shows how widely price changes are dispersed. It describes magnitude, not direction.
Formula
Standard Deviation of Returns (annualized)
How to Interpret
High Value
High volatility means returns vary over a wider range and short-term price uncertainty is greater.
Low Value
Low volatility means price changes stayed narrower; it does not eliminate sudden regime-shift risk.
Where It Is Used
Used for position sizing, risk limits, diversification, and risk-adjusted return analysis.