Coefficient Of Variation - CV

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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:

Coefficient Of Variation (CV)



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.

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RELATED FAQS
  1. What are some of the disadvantages of using coefficient of variation (COV)?

    Among the disadvantages of using coefficient of variation (COV) is the inability to calculate it at all if the mean of the ... Read Full Answer >>
  2. What are some of the advantages of using coefficient of variation (COV)?

    There are several advantages associated with using coefficient of variation (COV). COV is a statistical measure that is normalized ... Read Full Answer >>
  3. What can the coefficient of variation (COV) tell investors about an investment's ...

    The coefficient of variation (COV) can determine the volatility of an investment. The COV is a ratio between the standard ... Read Full Answer >>
  4. What is the difference between a simple random sample and a stratified random sample?

    Simple random samples and stratified random samples differ in how the sample is drawn from the overall population of data. ... Read Full Answer >>
  5. What are the advantages and disadvantages of using systematic sampling?

    As a statistical sampling method, systematic sampling is simpler and more straightforward than random sampling. It can also ... Read Full Answer >>
  6. What is the difference between the standard error of means and standard deviation?

    The standard deviation, or SD, measures the amount of variability or dispersion for a subject set of data from the mean, ... Read Full Answer >>
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