What is 'Dispersion'
Dispersion is a statistical term describing the size of the range of values expected for a particular variable. In finance, dispersion is used in studying the effects of investor and analyst beliefs on securities trading, and in the study of the variability of returns from a particular trading strategy or investment portfolio. It is often interpreted as a measure of the degree of uncertainty, and thus risk, associated with a particular security or investment portfolio.
BREAKING DOWN 'Dispersion'
For example, the familiar risk measurement, beta, measures the dispersion of a security's returns relative to a particular benchmark or market index. If the dispersion is greater than that of the benchmark, then the instrument is thought to be riskier than the benchmark. If the dispersion is less, then it is thought to be less risky than the benchmark.Beta is measured in a range of positive 1.0 to negative 1.0. A beta measure of positive 1.0 indicates the investment moves in unison with the benchmark. A beta of 0.0 signifies no correlation, and a beta of negative 1.0 shows contrary movement to the benchmark. For example, if an investment portfolio has a beta of 1.0 using the S&P 500 as a benchmark, the movement between the portfolio and benchmark is nearly identical. If the S&P 500 is up 10%, so is the portfolio. On a negative 1.0 beta, if the S&P 500 is up 10%, the portfolio moves in the exact opposite with a negative 10%.
Standard Deviation
Standard deviation is another commonly used statistic for measuring dispersion. It is a simple way to measure an investment or portfolio's volatility. The lower the standard deviation, the lower the volatility. For example, a biotech stock has a standard deviation of 20.0% with an average return of 10%. An investor should expect the price of the investment to move 20% in either a positive or negative manner away from the average return. In theory, the stock can fluctuate in value from negative 10% to positive 30%. Stocks have the highest standard deviation, with bonds and cash having much lower measures.
Alpha
Both beta and standard deviation are common measurements used to determine the dispersion of a portfolio but often work independently of each other. Alpha is a statistic that measures a portfolio's riskadjusted returns. A positive number suggests the portfolio should get a positive return in exchange for the risk level taken. A portfolio taking excessive risk and not getting a sufficient return has an alpha of 0 or less. Alpha is a tool for investors looking to measure the success of a portfolio manager. A portfolio manager with a positive alpha indicates a better return with either the same or less risk than the benchmark.

Volatility
1. A statistical measure of the dispersion of returns for a given ... 
Portable Alpha
A strategy in which portfolio managers separate alpha from beta ... 
Alpha
Alpha is used in finance to represent two things: 1. a measure ... 
Excess Returns
Investment returns from a security or portfolio that exceed a ... 
Beta
Beta is a measure of the volatility, or systematic risk, of a ... 
Benchmark Error
A situation in which the wrong benchmark is selected in a financial ...

ETFs & Mutual Funds
5 Ways To Measure Mutual Fund Risk
These statistical measurements highlight how to mitigate risk and increase rewards. 
Investing
Volatility
Learn more about this statistical measure and how it affects the dispersion of returns. 
Managing Wealth
How to Use a Benchmark to Evaluate a Portfolio
What is an investment benchmark and how is it used to evaluate the risk and return in a portfolio. 
Investing
How Investment Risk Is Quantified
FInancial advisors and wealth management firms use a variety of tools based in Modern portfolio theory to quantify investment risk. 
ETFs & Mutual Funds
How Mutual Funds Chasing Popular Stocks Hurt Alpha
Learn about the Goldman Sachs research report, which concluded that mutual funds overweight holdings of stocks that are less likely to outperform benchmark indices. 
Trading
Measuring And Managing Investment Risk
Risk is inseparable from return. Learn more about these measures and how to balance them. 
Managing Wealth
Evaluating Alpha and Beta
Alpha and beta are risk ratios that investors use to calculate, compare and predict returns. 
ETFs & Mutual Funds
Understanding Volatility Measurements
How do you choose a fund with an optimal riskreward combination? We teach you about standard deviation, beta and more! 
ETFs & Mutual Funds
Alpha and Beta for Beginners
An indepth look at what alpha and beta are and what they measure. 
Trading
Bettering Your Portfolio With Alpha And Beta
Increase your returns by creating the right balance of both these risk measures.

What is the relationship between alpha, beta, and rsquared when analyzing a fund?
I'm curious about alpha, beta, and rsquared. I have researched funds where the fund outperforms the index, but the alpha ... Read Answer >> 
What's the difference between alpha and beta?
Learn about alpha and beta, two very important technical risk ratios that investors use to evaluate relative performance, ... Read Answer >> 
How does my insurance company determine what premiums I have to pay for coverage?
Learn about some of the quantitative finance measures that investors without a strong math background can use in analyzing ... Read Answer >> 
What metrics should I use to evaluate the risk return tradeoff for a mutual fund?
Understand the key metrics used to analyze mutual funds and how investors can use each measurement to determine the riskreward ... Read Answer >> 
How does beta measure a stock's market risk?
Learn how beta is used to measure risk versus the stock market, and understand how it is calculated and used in the capital ... Read Answer >> 
What are some common measures of risk used in risk management?
Learn about common risk measures used in risk management and how to use common risk management techniques to assess the risk ... Read Answer >>