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
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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. ... 
Mean
The simple mathematical average of a set of two or more numbers. ... 
Coefficient Of Variation  CV
A statistical measure of the dispersion of data points in a data ... 
Covariance
A measure of the degree to which returns on two risky assets ...

What does standard deviation measure in a portfolio?
Standard deviation is a mathematical measurement of average variance and features prominently in statistics, economics, accounting ... Read Full Answer >> 
How is standard deviation used to determine volatility?
Though standard deviations can be a useful tool for measuring volatility in numerous financial arenas, including accounting ... Read Full Answer >> 
What is the difference between standard deviation and variance?
Standard deviation and variance, though basic mathematical concepts, play important roles in many areas of the financial ... Read Full Answer >> 
What is the difference between standard deviation and average deviation?
While there are many different ways to measure variability within a set of data, two of the most popular are standard deviation ... Read Full Answer >> 
What is the difference between standard deviation and mean?
Understanding the calculation and interpretation of mathematical fundamentals such as mean and standard deviation is essential ... Read Full Answer >> 
What is the difference between standard deviation and z score?
Though the finance industry can be complex, an understanding of the calculation and interpretation of basic mathematical ... Read Full Answer >> 
What is the difference between a Sharpe ratio and a Traynor ratio?
The Sharpe ratio and the Treynor ratio (both named for their creators, William Sharpe and Jack Treynor), are two ratios utilized ... Read Full Answer >> 
What is a good Sharpe ratio?
The Sharpe ratio is a wellknown and wellreputed measure of riskadjusted return on investment, developed by William Sharpe. ... Read Full Answer >>

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