Four companies with market capitalizations exceeding $200 billion—namely Arm, Marvell, AMD, and Intel—are among the most volatile large-cap companies on the entire U.S. market this year. Their shares have risen by tens to hundreds of percent since the start of the year. What is driving their extreme price swings, and how can you make sense of them?

Volatility is one of the most misunderstood concepts in the stock market. For some, it is synonymous with risk; for others, a source of opportunity. In reality, it is simply a measure of how sharply an asset’s price moves up and down. The higher the volatility, the greater the range between daily or weekly fluctuations. The more challenging it is to hold such a stock with a clear head.

Volatility is most commonly measured in two ways. The first is beta, which compares a stock’s movement to that of the broader market. A beta above 1 means the stock moves more than the index, while a beta below 1 signals more moderate movements. The second…