One price series, two distance calculations
Assume hypothetical year-end prices of 50, 100, 150, and 200 in the same currency. Linear distance is proportional to the price difference. For an ordinary logarithmic axis, distance is proportional to ln(new price / old price), where ln is the natural logarithm. Log values below are rounded to six decimals. These are coordinate distances, not pixels or observed market results.
- All three vertical steps are equal on a linear axis. On a log axis, the first step is largest and the third is smallest.
- Compare 50 to 100 with 100 to 200 within that same series. Both ratios are 2, so their log distances are equal. Their linear distances are 50 and 100.
- Equal percentage changes have equal log distances, but distance is not directly proportional to the simple percentage number. A 100% rise has ln(2) / ln(1.1) = 7.27 times the log distance of a 10% rise, not ten times.
- Changing the logarithm base rescales every coordinate by the same factor. It does not change which ratios have equal spacing.
| Move | Price difference | Simple change | Log distance |
|---|---|---|---|
| Year 0 to 1: 50 to 100 | +50 | +100.00% | ln(2) = 0.693147 |
| Year 1 to 2: 100 to 150 | +50 | +50.00% | ln(1.5) = 0.405465 |
| Year 2 to 3: 150 to 200 | +50 | +33.33% | ln(4/3) = 0.287682 |