DEFINITION of 'Standard Deviation'
1. A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance.
2. In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility.
INVESTOPEDIA EXPLAINS 'Standard Deviation'
Standard deviation is a statistical measurement that sheds light on historical volatility. For example, a volatile stock will have a high standard deviation while the deviation of a stable blue chip stock will be lower. A large dispersion tells us how much the return on the fund is deviating from the expected normal returns.
Want to know more about risk measurement? Please read Standard Deviation & Value At Risk and The Uses And Limits Of Volatility
VIDEO

Variance
The spread between numbers in a data set, measuring Variance ... 
Analysis Of Variances  ANOVA
An analysis of the variation between all of the variables used ... 
Standard Error
The standard deviation of the sampling distribution of a statistic. ... 
Tail Risk
A form of portfolio risk that arises when the possibility that ... 
Heteroskedasticity
In statistics, when the standard deviations of a variable, monitored ... 
Mode
A statistical term that refers to the most frequently occurring ...

What does standard deviation measure in a portfolio?
Dig deeper into the investment uses of, and mathematical principles behind, standard deviation as a measurement of portfolio ... 
How is standard deviation used to determine volatility?
Understand how standard deviations and Bollinger Bands are used to measure market volatility and how this is helpful in establishing ... 
What is the difference between standard deviation and variance?
Understand the difference between standard deviation and variance; learn how each is calculated and how these concepts are ... 
What is the difference between standard deviation and average deviation?
Understand the basics of standard deviation and average deviation, including how each is calculated and why standard deviation ... 
What is the difference between standard deviation and mean?
Understand the basics of calculating and interpreting mean and standard deviation and how these mathematical fundamentals ... 
What is the difference between standard deviation and z score?
Understand the basics of standard deviation and Zscore; learn how each is calculated and used in the assessment of market ... 
What is the difference between a Sharpe ratio and a Traynor ratio?
Understand the difference between two methods of evaluating portfolio returns on investment, the Sharpe ratio and the Treynor ... 
What is a good Sharpe ratio?
Understand how the Sharpe ratio is calculated, and its significance and use for investors in evaluating the performance of ...

Markets
Using Historical Volatility To Gauge Future Risk
Use these calculations to uncover the risk involved in your investments. 
Personal Finance
Does Your Investment Manager Measure Up?
These key stats will reveal whether your advisor is a league leader or a benchwarmer. 
Markets
The Uses And Limits Of Volatility
Check out how the assumptions of theoretical risk models compare to actual market performance. 
Fundamental Analysis
Quantitative Analysis Of Hedge Funds
Hedge fund analysis requires more than just the metrics used to analyze mutual funds. 
Investing
Tips For Investors In Volatile Markets
Find out what to look out for when trading during market instability. 
Mutual Funds & ETFs
Understanding Volatility Measurements
How do you choose a fund with an optimal riskreward combination? We teach you about standard deviation, beta and more! 
Forex Education
Improve Your Investing With Excel
Excel is a useful tool to assist with investment organization and evaluation. Find out how to use it. 
Forex Education
Trading With Gaussian Models Of Statistics
The entire study of statistics originated from Gauss and allowed us to understand markets, prices and probabilities, among other applications. 
Active Trading Fundamentals
Bet Smarter With The Monte Carlo Simulation
This technique can reduce uncertainty in estimating future outcomes. 
Active Trading Fundamentals
How The Sharpe Ratio Can Oversimplify Risk
When it comes to hedge funds, this measure is not reliable on its own.