The last quarter of a turbulent 2022 has begun. Those that were hoping for a more constructive stock market environment got, instead, more of the same: intense price volatility.
Take Apple stock (AAPL) – Get Apple Inc. Report, for example. After rallying on the first two days of October (up 3.1% and 2.6%) and surpassing $146, shares U-turned and nearly reached the September low of $138 apiece. The short-lived rally and pullback were not a surprise to the Apple Maven.
Today, I look at some numbers that help to illustrate how unpredictable AAPL has been lately – and how much of a roller coaster ride investors should continue to expect in the near term.
Figure 1: Apple Stock: Wild Start To Q4, What Next?
Unsplash
(Read more from Apple Maven: Apple: Q3 Mac Sales Impress, Will AAPL Stock Surge?)
AAPL: volatility at a high
I know, it is a statistical crime to take a small sample size and extrapolate the observations to describe the bigger picture. But hear me out for a moment.
The chart below shows the rolling ten-day volatility in AAPL stock, in annualized terms. The higher the number, the more “jittery” Apple shares have been in the previous few trading days.
Figure 2: AAPL annualized volatility, previous 10 trading days.
DM Martins Research
Notice a couple of things:
- Historically, the stock’s average volatility has been roughly 27%, which is about 1.5 times higher than the S&P 500’s
- As of the end of the first week of October, this number reached a whopping 41%, one of the highest readings since the start of 2021
Here’s another way to think about how intense the ups and downs in AAPL share price have been. Over the past ten trading days, Apple stock has swung an average of 3 percentage points from the lowest to the highest point within one trading session.
That is: from peak to trough within a single day, Apple has lost an average of $67 billion in market cap (or, glass half full, gained this much from trough to peak, when the stock moved in the opposite direction). See chart below.
Figure 3: Apple’s 10-day average swing in price, session high-low.
DM Martins Research
For reference, the average intraday swing since the start of 2021 has been 2.3%. Since the start of the last decade, i.e. January 2010, the number has been even lower: 2.2%.
Why volatility matters
There are two common features of stock volatility. First, it usually happens when the market is in distress, not when it is on its way to new highs. Second, it tends to invite more volatility in the near term – a phenomenon that is known as volatility clustering.
This is why heightened volatility in Apple stock matters: because it helps to inform investors what to expect in the immediate future.
More specifically, I believe that AAPL will continue to seesaw over the next few days. In the long term, those who buy the fear today are likely to be rewarded. But in the short term, expect more ups and downs, maybe even new lows – AAPL dipped to as much as $131 in June 2022.
Land a Top Equity Research Job with Peak Frameworks
Equity research is a great career path that combines deep industry analysis and financial modeling, while exposing you to the strategic frameworks of many different types of investors in the stock market.
Many students have used the Peak Frameworks Equity Research course to break into the industry out of school, or to transition into the field from a non-finance career path. The lead instructor has experience working at Goldman Sachs and J.P. Morgan and was involved in the recruiting process at both banks, so you’ll get a comprehensive view of the skills you need to get and prepare for an interview.
To learn more, click on this link and use the code APPLEMAVEN10 for 10% off the course.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)
