Standard deviation, which can be found in a number of published services, measures a stock's volatility, regardless of the cause. Higher standard deviations represent more volatility. In statistical terms, 68% of the time the stock's range of returns will fall within one standard deviation of the average return, while 95% of the time the stock's range of returns will fall within two standard deviations. Assume you own a stock with an average return of 10.2% and a standard deviation of 15%. 68% of the time you can expect your return to fall within a range of -4.8% to 25.2%, while 95% of the time you can expect your return to fall within a range of -19.8% to 40.2%.

Source: http://www.investorguide.com/igu-article-823-stock-basics-measuring-a-stocks-risk.html

Tags: standard deviation, volatility, stock picking

  

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