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Volatility

Trading Term

A statistical measure of the distribution of returns for a specific security or market index. Volatility can be measured by using the standard deviation or by the variance between returns from the same security or market index. Typically, the higher the volatility, the riskier the security. A high volatility indicates that a security's value can potentially be spread out over a larger range of values, meaning that the price of the security may fluctuate dramatically over a short period of time in either direction. A low volatility indicates that a security's value does not change dramatically, but changes in value steadily over a period of time.

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