Volatility Formula | How to Calculate Daily & Annualized Volatility in Excel? (2024)

FAQs

Volatility Formula | How to Calculate Daily & Annualized Volatility in Excel? ›

Type "=STDEV. S(D4 : D12)" in cell D13 to find the daily volatility of the S&P 500 within the sample data. Find the annualized standard deviation — annual volatility — of the the S&P 500 by multiplying the daily volatility by square root of the number of trading days in a year, which is 252.

The example above used daily closing prices, and there are 250-252 trading days per year. Therefore, in cell C14, enter the formula "=SQRT(252)*C13" to convert the standard deviation for this 10-day period to annualized historical volatility.

Annualized volatility formula

Since there are roughly 252 trading days in the year, you multiply the square root of 252 (15.9) by the daily volatility to get the annualized volatility. (We'll use monthly returns in the case below, so the time period will be 12 times a year.)

The formula for daily volatility is computed by finding out the square root of the variance of a daily stock price. Further, the annualized volatility formula is calculated by multiplying the daily volatility by a square root of 252.

Stockopedia explains Daily Volatility

The daily return is calculated as today's price, minus yesterday's price, all divided by yesterday's price. Once this is done, the standard deviation of the time series of daily returns is the daily volatility of the security.

Volatility is a statistical measure of the dispersion of data around its mean over a certain period of time. It is calculated as the standard deviation multiplied by the square root of the number of time periods, T. In finance, it represents this dispersion of market prices, on an annualized basis.

To annualize data from a single month in Excel, use the formula: =[Value for 1 month] * 12. This multiplies the monthly value by 12 to project the annualized figure.

To compute the annualized variance from the daily variance, we assume that each day has the same variance, and we multiply the daily variance by 365 with weekends included.

The sum of all previous calculations is then multiplied by the result of the number of minutes in a 365-day year (525,600) divided by the number of minutes in 30 days (43,200). The square root of that number multiplied by 100 equals the VIX.

Calculating variance is very similar to calculating standard deviation. Ensure your data is in a single range of cells in Excel. If your data represents the entire population, enter the formula "=VAR. P(A1:A20)." Alternatively, if your data is a sample from some larger population, enter the formula "=VAR.

How do you calculate actual volatility? ›

Calculation Methods

Subtract the previous day's value from the current day's value. Divide the result by the previous day's value. Multiply the quotient by 100 to get the percentage change.

Find the daily standard deviation — daily volatility — of the sample by using the STDEV. S function. Type "=STDEV. S(D4 : D12)" in cell D13 to find the daily volatility of the S&P 500 within the sample data.

Likewise to convert the annual volatility to daily volatility, divide the annual volatility by square root of time.

Annualized volatility is a statistical measure of the dispersion of returns of a financial instrument over a given period, expressed in terms of an annualized standard deviation.

You can type the CAGR Excel formula in two ways. The first method involves using manual numbers, and the formula is: =(650/100)^(⅕)-1. 650 is the present value, 100 is the initial value, and 5 is the number of years between the two data points.

To do this in Excel, use the AVERAGE function to calculate the average return and then the POWER function to annualize it. For example, if your data is in cells A1:A10, you would use the following formula: =POWER(AVERAGE(A1:A10),1/10)-1.