Historical Volatility
Historical volatility quantifies the rate at which a stock's price fluctuates over a specified period, based on past market data. It's derived by calculating the standard deviation of daily percentage changes in the stock's price, then annualizing this figure to express it as a percentage. Known also as actual or realized volatility, it serves as a critical measure for investors and traders to assess risk and market activity.
Measurement Periods
The choice of timeframe for analyzing historical volatility varies according to the investor's or trader's strategy. Short-term traders often opt for intervals like five, 10, 20, or 30 days to gauge recent market dynamics. Meanwhile, intermediate to long-term investors may prefer extended periods such as 60, 90, 180, or 360 days to understand broader trends and make informed decisions based on longer-term price movements.