Volatility
Volatility measures how much your portfolio moves around its own average. It is the raw material for most of the other risk measures on the Performance tab.
On this page
Volatility is how much your portfolio bounces around, expressed as a single annual percentage. A portfolio at 8% volatility has drifted; one at 40% has lurched.
It is the base ingredient for most of the rest of the risk grid. Sharpe divides by it, Sortino replaces it with a one sided version, tracking error applies it to your gap against a benchmark. Understanding this one makes the others straightforward.
How it is calculated
Gylder takes the daily percentage change in your portfolio's value, computes the standard deviation of those changes, and scales it to a year:
volatility = standard deviation of daily returns × √252
The 252 is the number of trading days in a year. Multiplying by its square root is the standard way of turning a daily figure into an annual one, and it is why an 8% annual volatility corresponds to daily moves far smaller than 8%.
How to read it
Higher means a wider spread of outcomes, in both directions. That last part is the one people forget: volatility is symmetric, and a portfolio that jumps sharply upward is measured as exactly as volatile as one that falls just as sharply.
Gylder does not label a volatility figure as high or low. What is reasonable depends entirely on what you hold. A portfolio of short dated government bonds and one of small cap growth stocks are not on the same scale, and a single threshold across both would be meaningless.
The comparison that does work is against yourself, over the same length of window, before and after a change in what you hold.
What it misses
Volatility says nothing about direction. Two portfolios can post identical volatility while one doubled and the other halved.
It also assumes the spread of returns is reasonably well behaved, which real portfolios are not. Concentrated positions and thinly traded assets both tend to produce a figure that looks calmer than the position actually is, because the price simply did not update on the days it would have moved most.
For the downside only version, see Sortino ratio. For the worst actual loss rather than the average spread, see maximum drawdown.
A note on precision
Deep in history, Gylder stores your value series weekly rather than daily to keep the dashboard fast. Volatility computed across a long window is therefore an approximation, and a slightly smoothed one, since weekly sampling cannot see the daily moves inside each week. It is honest for reading your portfolio. It is not a compliance grade measurement.
Was this helpful?