Volatility represents how large an asset's prices swing around the mean price—it is a statistical measure of its dispersion of returns. There are several ways to measure volatility, including beta coefficients, option pricing models, and standard deviations of returns.

Simply put, volatility is a reflection of the degree to which price moves. A stock with a price that fluctuates wildly, hits new highs and lows, or moves erratically is considered highly volatile. A stock that maintains a relatively stable price has low volatility. A highly volatile stock is inherently riskier, but that risk cuts both ways.