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Glossary
Returns & risk

Volatility

How much a price swings about. Not the same thing as risk.

Volatility is the standard deviation of returns: a measure of dispersion, in both directions. Finance treats it as risk because it is measurable, and mathematics prefers things it can measure.

But risk is the chance of losing money permanently. A share that halves and recovers was volatile; a share that quietly goes to zero was risky. For an investor who can wait, volatility is mostly noise, and occasionally an opportunity.

Figure

Volatile is not the same as risky

Volatile, fineCalm, ruined

The jumpy line ends higher. The calm one quietly walks to zero. Volatility is what you feel; risk is what actually takes your money.

Why it matters

It becomes real risk the moment you are forced to sell, whether by a margin call or by your own nerves.

The mistake everyone makes

Selling a good business because the price is jumping around.

Related terms

Beta
How much a stock moves relative to the market as a whole.
Standard deviation
The statistical measure behind volatility: how far returns typically stray from average.
Drawdown
The fall from a peak to the following trough. The pain, measured.
Sharpe ratio
Return earned per unit of volatility endured.

See Volatility on a real company

SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.

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