Educational material from 
What you will learn
- Calculate the change between two consecutive observations.
- Distinguish fluctuations during a period from its total result.
- State observation intervals and limitations before comparing.
Two paths from 100 to 103
Series A is SEK 100, 101, 102 and 103. Series B is SEK 100, 120, 90 and 103. Both are observed at the same four fictional week ends. Each total price change is (103 − 100) / 100 = 3%. Dividends, fees and other events are excluded.
A rises a little between every observation. B rises sharply, falls and then partly recovers. The difference disappears if you inspect only the first and last rows. A positive final result therefore does not mean the price was stable along the way, and large fluctuations need not end in a bigger profit.
If the table does not fit, scroll it sideways.
| Observation | Series A | Series B |
|---|---|---|
| Start | SEK 100 | SEK 100 |
| Week 1 | SEK 101 | SEK 120 |
| Week 2 | SEK 102 | SEK 90 |
| Week 3 | SEK 103 | SEK 103 |
Calculate each movement from its own starting price
A first changes by 1 / 100 = 1%. Its next step is 1 / 101, approximately 0.99%, and its last is 1 / 102, approximately 0.98%. B changes by 20 / 100 = 20%, then −30 / 120 = −25%, and finally 13 / 90, approximately 14.44%.
Each denominator is the price immediately before that step. Dividing B’s SEK 30 fall by the entire series’ starting price of SEK 100 gives −30%, answering a different question. You also cannot add the three percentage changes to obtain the total 3%; the successive steps have changing bases.
If the table does not fit, scroll it sideways.
| Step | Series A | Series B |
|---|---|---|
| Start → week 1 | +1.00% | +20.00% |
| Week 1 → week 2 | +0.99% | −25.00% |
| Week 2 → week 3 | +0.98% | +14.44% |
This illustrates fluctuations without calculating statistical volatility
The steps show larger observed rises and falls in B in our example. We have not calculated a statistical volatility measure or annual volatility. Such measures need an explicit method, enough observations and a chosen interval. Standard deviation of period returns is a common way to measure dispersion.
The difference between the highest and lowest price is not automatically the same measure as standard deviation. Nor can you compare a figure based on daily returns with one based on monthly returns without checking the calculation method. State what your table actually measures rather than labelling four prices as annual volatility.
A quiet snapshot does not exclude other risks
The week-end prices reveal nothing about movements between observations. B may have had other peaks and troughs missing from these figures. Historical fluctuations do not establish next week’s price either. Liquidity, the company’s finances and the possibility of losing money need their own questions.
A separate drawdown lesson examines the largest observed decline from an earlier peak. Keep a record of period, data interval and assumptions when making a manual comparison, and use Investiq’s lesson guide for the next step. This table is teaching data and does not confirm a particular volatility measure in the app.
Try it yourself
Two fictional series are C: 100, 105, 110 and D: 100, 80, 110. What is each total price change? What are D’s two intermediate percentage changes?
Show the solution and explanation
Both finish at +10%. D’s steps are −20% followed by +37.5%.
Start to finish is (110 − 100) / 100 = 10%. D falls by (80 − 100) / 100 = −20%, then rises by (110 − 80) / 80 = 37.5%. Identical endpoints therefore do not mean an identical path.
Check your understanding
Can you simply add three percentage steps with different bases to get total return?
No. Calculate start to finish or multiply the successive change factors.
Do four weekly prices establish future annual volatility?
No. They are limited historical observations without that statistical calculation.
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Trading, risk and benchmarks
Sources and examples
The sources support the factual explanations. Calculations and exercises were created for this lesson. Amounts and price changes are invented unless stated otherwise.
This material is educational and does not recommend securities to buy. A simulated result does not guarantee a future result.
