Скачать или смотреть What is Historical Volatility, and how is it calculated?

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Historical Volatility: A Measure of Price Fluctuations

*Historical volatility* is a statistical measure that gauges how much a security's price has fluctuated over a specific period. It's often used to assess risk and potential returns. A high historical volatility indicates that the security's price has experienced significant swings, while a low historical volatility suggests more stable price movements.

How is it calculated?

1. *Calculate daily returns:* This involves determining the percentage change in the security's price each day. The formula is:
```
Daily Return = (Today's Price - Yesterday's Price) / Yesterday's Price
```
2. *Calculate standard deviation:* This measures the dispersion of the daily returns from their average. It's a statistical measure that indicates how much the data points deviate from the mean.
3. *Annualize the standard deviation:* To get an annualized volatility, multiply the daily standard deviation by the square root of the number of trading days in a year (typically 252).

Example in the Indian Market

Let's say we want to calculate the historical volatility of Reliance Industries Ltd. (RIL) over the past month.

1. *Gather daily closing prices:* Collect the daily closing prices of RIL for the past month.
2. *Calculate daily returns:* Use the formula mentioned above to calculate the daily return for each day.
3. *Calculate standard deviation:* Use a statistical software or calculator to compute the standard deviation of these daily returns.
4. *Annualize:* Multiply the standard deviation by the square root of 252 (assuming 252 trading days in a year).

*Note:* The calculated historical volatility is a measure of past price fluctuations. It does not guarantee future performance, but it can provide insights into potential risk and reward. Other factors like market conditions, company news, and economic indicators also influence a stock's price.

*Additional resources:*

*Zerodha:* [https://zerodha.com/varsity/chapter/v...](https://zerodha.com/varsity/chapter/v...)

*NSE:* [https://www.nseindia.com/reports-indi...](https://www.nseindia.com/reports-indi...)

By understanding historical volatility, investors can make more informed decisions about their investments and manage risk effectively.

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