GEX's volatility is measured either by using standard deviation or beta. Standard deviation will reflect the average amount of how gex index's price will differ from the mean after some time.To get its calculation, you should first determine the mean price during the specified period then subtract that from each price point.
What Drives a GEX Price Volatility?
Several factors can influence a index's market volatility:
Industry
Specific events can influence volatility within a particular industry. For instance, a significant weather upheaval in a crucial oil-production site may cause oil prices to increase in the oil sector. The direct result will be the rise in the stock price of oil distribution companies. Similarly, any government regulation in a specific industry could negatively influence stock prices due to increased regulations on compliance that may impact the company's future earnings and growth.
Political and Economic environment
When governments make significant decisions regarding trade agreements, policies, and legislation regarding specific industries, they will influence stock prices. Everything from speeches to elections may influence investors, who can directly influence the stock prices in any particular industry. The prevailing economic situation also plays a significant role in stock prices. When the economy is doing well, investors will have a positive reaction and hence, better stock prices and vice versa.
The Company's Performance
Sometimes volatility will only affect an individual company. For example, a revolutionary product launch or strong earnings report may attract many investors to purchase the company. This positive attention will raise the company's stock price. In contrast, product recalls and data breaches may negatively influence a company's stock prices.
Check out
Risk vs Return Analysis to better understand how to build diversified portfolios. Also, note that the market value of any index could be tightly coupled with the direction of predictive economic indicators such as
signals in gross domestic product.
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