How to Calculate Daily Price Variation in Stocks

Investors use many different tools and computations to guide their decisions about when to buy or sell stock. Many of these tools are very complex, though investment websites and software make them simple enough for even beginner investors to use. However, other calculations that reveal information about a stock are quite simple to calculate, including daily price variation.

Definition

The daily price variation of a stock is the difference between its highest and lowest values on a given trading day. Daily price variation may also refer to the difference between one day's opening price and the next day's opening price. Daily price variation is a measure of volatility, or how much a stock's value changes. Although it is a daily measurement, average daily variations can be calculated by adding up individual daily price variations and dividing the total by the number of days to spot a more long-term trend.

Process

To calculate the amount of a daily price variation, you'll need to know the high and low prices for a given stock on a given day. Most newspaper and online stock quotes give this basic information, labeled "high" and "low." Subtract the smaller number from the larger number to determine the daily price variation. Since it is only a measure of variation, or difference, it does not matter whether the stock gained or lost value.

Translating to a Percentage

You can turn a daily price variation from a dollar amount into a percentage. This is especially helpful if you want to compare the daily price variations in multiple stocks. To calculate daily price variation as a percentage, divide the variation amount by the closing price of the stock. For example, if a stock opened at $75 per share, fell to $70 and remained there until the end of the day, you would divide $5 (the daily price variation) by $70 (the closing, or current, price) for a result of .071, representing a 7.1% daily price variation.

Uses

Investors use daily price variation data in a number of ways. The data serve foremost as an indicator of volatility. A stock with a very large daily price variation is very volatile and may be expected to change its value quickly over time. When daily price variations are small, it indicates more consensus within the market about the value of the stock. Stable daily price variations over time show that a stock is unlikely to shoot up or plummet in value on any given day.

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