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6 Low-Volatility Stocks for a Volatile Market

MILLBURN, N.J. ( Stockpickr) -- Last week the markets endured a historical bout of volatility as global indices plunged around the world. Fears persisted as we entered the weekend only to be exacerbated by the Friday evening announcement that Standard & Poor's downgraded the long-term debt of the U.S. from AAA to AA+. Volatility surged as market participants bought insurance protection and began to panic.

Volatility can be measured in several ways:

  1. Implied Volatility: This is the volatility level which is used to price individual stock and index options.
  2. Historical Volatility: This measures the realized or actual volatility of an individual stock or index over a defined period of time.
  3. Volatility Index: This is a weighted average of implied volatilities for several index options for a particular index. The most popular volatility index is the S&P 500 Volatility Index, or the VIX.

Historical volatilities for seemingly all stocks rose dramatically over the course of the last week and month. The VIX index rose to 32 from 25.25 in just one week and averaged 27.1 over that period of time. The realized volatility for the VIX was 53.23 during that week. Historically, over the long term, the VIX has an average of about 20 with a standard deviation of about 8. Over the past year, the VIX has averaged 19.54 with a standard deviation of 3.17 and realized volatility of 11.92.

Related: 5 Blue-Chips to Ride Out a Double-Dip

Low-volatility stocks will offer less risk and growth potential to investors while usually paying above-market dividends. With that in mind, here are six low-volatility stocks to consider in the current high-volatility environment. These stocks are drawn from several industry groups, including consumer products, beverages and snacks, pharmaceuticals and medical devices, retail, electric utilities and financial services. The result is a diversified low-volatility portfolio with above-market dividend yields.
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