White Paper

Volatility: As Simple as Standard Deviation?

Why Accurate Volatility Estimation Matters for Managing Risk and Enhancing Return

Richard Yasenchak CFA, Head of Client Portfolio Management
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In today’s markets, investors must measure risk with care. Whether managing personal savings or institutional portfolios, they often rely on annualized risk estimates to guide capital allocation and long-term planning.

Underestimating risk, even modestly, can lead to unintended downside exposure, capital misallocation, or misinterpretation of a strategy’s risk-adjusted return. For long-term investors, risk managers, and fiduciaries, such misjudgments can undermine portfolio objectives.

In this paper, we’ll:

  • Outline the limitations of simplistic volatility scaling
  • Highlight how return structures (particularly autocorrelation, volatility clustering, and extreme outcomes) can materially distort annualized risk
  • Illustrate that these effects vary over time, underscoring the value of a dynamic, data-informed approach to risk measurement

Download our paper to learn more about how measuring risk is more than a technical detail, but a foundational step in portfolio management.