Coefficient Of Variation - CV
Definition of 'Coefficient Of Variation - CV'
A statistical measure of the dispersion of data points in a data series around the mean. It is calculated as follows:
The coefficient of variation represents the ratio of the standard deviation to the mean, and it is a useful statistic for comparing the degree of variation from one data series to another, even if the means are drastically different from each other.
Investopedia explains 'Coefficient Of Variation - CV'
In the investing world, the coefficient of variation allows you to determine how much volatility (risk) you are assuming in comparison to the amount of return you can expect from your investment. In simple language, the lower the ratio of standard deviation to mean return, the better your risk-return tradeoff.
Note that if the expected return in the denominator of the calculation is negative or zero, the ratio will not make sense.