Volatility. Some love it. And I’m guessing most equity investors hate it. That’s because it usually spikes during a downturn in prices. Some stocks, and indeed some industries, sectors and indices and even entire markets, are inherently more volatile than others. Today we are looking at the most volatile UK stocks. But before that a little primer.
A stocks volatility is defined here as the standard deviation of its daily price return series. How many days to include in the price series is up to the individual, as their is no agreed upon standard, but taking years worth (roughly 242 trading days) is a common practice. I like to take a years worth, and I like to convert it to a monthly number, by multiplying the standard deviation by the square root of the average number of trading days in a month, which is 21.
Bigger daily moves equals more volatility, and higher volatility is usually equated with higher risk. However, volatility to the upside is typically more desirable than volatility to the downside, at least for long equity investors. Standard deviation does not distinguish between up and down moves. There are calculations that do, but they are not as well known.
The most volatile UK stock
Vast Resources has daily volatility of 20.28% and a 21 day volatility of 92.93%. It is, perhaps unsurprisingly, a mining and resource development company with operations in Romania, Tajikistan and Zimbabwe. Why is it always mining or oil exploration companies, or biotec companies?
Anyways, In January of this year the Vast stock price quadrupled after the company released its interim report. Since then the stock of this £10.9m market cap company has given back most of those gains. Those moves have of course significantly contributed to the stocks sky high volatility.
Not far behind Vast is Mirriad Advertising with a 21-day volatility of 84.18%. This is a £6.36m market cap company involved in in-content advertising: think Google Ads without the scale. It has AI in the business description blurb, so there’s that.
Following Miriad in that has become a top three is £2.31m Tialis Essential IT, which is “engaged in the provision of end-to-end solutions to enterprise scale end-customers, public and private, concentrating on end user device management and on-site support solutions”. Ok. It has a 21-day volatility of 57.97%
One thing to notice about the top three is that they are all micro-cap stocks with, I presume, low liquidity.
The top ten most volatile UK stocks by index
Larger market cap stocks, with big free floats and large average trading volumes tend to have lower volatility. Take the top ten most volatile FTSE 100 stocks for example:
- Ocado, 21-day volatility 20.94%
- Rolls-Royce, 21-day volatility 20.90%
- IAG, 21-day volatility 16.54%
- Melrose Industries, 21-day volatility 14.20%
- Airtel Africa, 21-day volatility 13.11%
- Entain, 21-day volatility 12.92%
- Fresnillo, 21-day volatility 12.88%
- Anglo American, 21-day volatility 12.83%
- JD Sports, 21-day volatility 12.79%
- Antofagasta, 21-day volatility 12.28%
FTSE 100 companies are as large as it gets for UK stocks. The most volatile of these, Ocado, has a quarter the volatility of Vast. How about the FTSE 250:
- Mobico, 21-day volatility 24.15%
- Darktrace, 21-day volatility 5.14%
- Vanquis Banking, 21-day volatility 22.73%
- Aston Martin, 21-day volatility 22.68%
- Carnival, 21-day volatility 20.71%
- Hammerson, 21-day volatility 19.80%
- Network International, 21-day volatility 19.34%
- Ferrexpo, 21-day volatility 19.29%
- Harbour Energy, 21-day volatility 18.56%
- Trainline, 21-day volatility 18.51%
The pattern is repeated, FTSE 250 stocks are slightly more volatile than their larger FTSE 100 counterparts. But the most volatile FTSE 250 stock still has just about a third of the volatility of the most volatile UK stock.
Some context: the volatility of the FTSE All-Share
For some context, let’s look at the volatility of the FTSE All-Share index. The index has a median 21-day volatility of 11.4%. This is to be expected. Although the FTSE All-Share index includes small caps included, its large cap constituents, by virtue of their weights will drag volatility down.
Plus there are diversification benefits at play. With hundred of stocks contributing to the price of the index, if one or many are having a bad day, a lot won’t be, so large daily moves tend to be rarer. But that does not mean that the index does not get choppy.
The 21-day volatility of the FTSE All-Share almost hit 70% during the COVID-19 market crash. But, despite market conditions at the time were about as adverse as you can get, the index was still not as choppy as the most volatile UK stock is right now.
DISCLAIMER; DISCLAIMER: James J. McCombie owns shares in Anglo American. The Storied Investor has no beneficial ownership position in any of the stocks or securities mentioned. No comment in this article should be construed as a recommendation of, or opinion regarding the future performance of, any stock or security or collection of them mentioned herein. Opinions expressed are the author’s and do not represent the views of The Storied Investor.
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