Absolute Volatility – it’s a measure of the dispersion of returns and calculated as the standard deviation of the series. If we are talking about securities, you can take daily closes for specific period and calculate daily standard deviation for the period. The you need to normalize it, simply multiply it by SQRT(N) where N is a number of days. With similar way you can calculate weekly and monthly volatility.
We calculate volatility for all assets for 1 month, 3 months and 1 year period, you can find these numbers here, for example:
Relative Volatility – it’s a measure of the volatility in comparison to another asset or index. If we are talking about comparison with market index, then relative volatility called Beta. In terms of math the formula is quite easy:
- Cov – covariance between stock and market
- Var – variance of the market.
- You can use any security instead of market in order to calculate relative volatility between two securities.
At Unicorn Bay, we providewhere you can easy calculate relative volatility for any two securities, for example: