GlossaryStandard deviationAnnualised volatilityVol

Volatility

Volatility is the annualised standard deviation of a fund's returns; it measures how widely returns have swung around their average and underpins the SRRI and Sharpe ratio.

Volatility is the standard deviation of a fund's periodic returns, annualised so figures over different frequencies can be compared. A fund with 15% annualised volatility has, roughly speaking, seen its yearly return land within 15 percentage points of its average about two-thirds of the time. Factsheets usually report volatility over one, three and five years using monthly or weekly returns.

Volatility is symmetric: it counts a sharp rise the same as a sharp fall. It is a measure of how bumpy the ride has been, not of how much money could be lost; that is what maximum drawdown addresses.

Why it matters

Volatility is the building block of most risk metrics investors see. The UCITS SRRI maps five-year volatility to a 1–7 class, the PRIIPs SRI derives its market risk measure from it, and the Sharpe ratio divides excess return by it. In a robo-advisor or risk-profiling flow, volatility bands are typically how funds are matched to client risk appetite.

In the API

The three-year annualised volatility is returned alongside the risk indicator that is derived from a similar calculation.

json
{
  "headlineMetrics": {
    "volatility3y": 12.6,
    "sharpe3y": 0.7
  },
  "riskRating": 5
}

Example values. Volatility is a percentage per year; riskRating is the class shown in the fund's current KID or KIID.

Common pitfalls

Past volatility is a description, not a forecast. Calm periods understate what a fund can do in a crisis.
Windows matter. Three-year and five-year volatility can differ substantially when a stressed period enters or leaves the window.
Compare volatility in the same currency; a hedged and an unhedged share class of one fund will show different numbers.