Volatility

Volatility measures the degree of price variation in a security or market over time. High volatility means prices are moving rapidly and unpredictably; low volatility means prices are relatively stable. For traders and investors, understanding volatility is fundamental to sizing positions, managing risk, and reading market conditions.

Realised Volatility

Realised volatility is calculated from actual historical price movements — it measures what volatility has been over a defined lookback period, rather than what the market expects it to be. This makes it a concrete, objective measure of how much a security has actually moved.

The dashboard uses a 40-day lookback window, which captures roughly two months of daily price data — long enough to smooth out single-day spikes, but short enough to remain responsive to changing conditions.

Percentile Rank

Rather than displaying raw volatility numbers (which vary significantly between sectors and individual stocks), the heatmap shows each reading as a percentile rank. This answers the question: how does today's volatility compare to all historical readings for the same security?

• A reading near 0% means volatility is at historically low levels — the security is unusually calm.
• A reading near 50% means volatility is around its historical average.
• A reading near 100% means volatility is at or near historically extreme levels — a signal of significant stress or uncertainty.

Percentile ranks make it easy to compare volatility across different sectors on a level playing field, regardless of each sector's typical price behaviour.

Reading the Heatmap

The heatmap displays the volatility percentile rank for 15 sector and macro ETFs, grouped into four categories: Defensive, Sensitive, Cyclical, and Macro. Each cell is colour-coded from deep teal (low volatility) through to burnt sienna (high volatility).

When an entire group lights up toward the warm end of the scale, it signals broad stress within that part of the market. When readings are cool and consistent across all groups, conditions are generally calm and conducive to trend-following strategies.

Elevated volatility in the Macro group (UUP, TLT, DBC, GLD) is often an early warning of macro-level instability — currency stress, bond market dislocations, or commodity shocks — before those pressures fully flow through to equity sectors.