Market Volatility

Volatility #

Volatility refers to the degree of variation of an asset’s price over time. It is often used to measure the level of risk associated with a particular investment. Generally, the higher the volatility, the riskier the investment is considered to be.

For example, if a stock price experiences large fluctuations over a short period of time, it is said to be highly volatile. On the other hand, if a stock’s price remains relatively stable over a long period of time, it is considered to have low volatility.

Beta #

Beta is a measure of a stock’s volatility in relation to the overall market. A stock with a beta of 1.0 is expected to move in line with the market, while a stock with a beta greater than 1.0 is expected to be more volatile than the market. A stock with a beta less than 1.0 is expected to be less volatile than the market.

For example, if a stock has a beta of 1.5, it is expected to be 50% more volatile than the overall market. On the other hand, if a stock has a beta of 0.5, it is expected to be 50% less volatile than the market.

The VIX (Volatility Index) #

The VIX (Volatility Index) is a measure of the market’s expectation of volatility over the next 30 days. It is often referred to as the “fear index” because it tends to increase during periods of market uncertainty and decrease during periods of market stability.

For example, if the VIX is at 20, it indicates that the market expects the S&P 500 index to fluctuate by approximately 20% over the next 30 days. A higher VIX is typically associated with greater market uncertainty and risk.