Standard Deviation (redirected from Stdev)

Standard deviation

The square root of the variance. A measure of dispersion of a set of data from its mean.

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Historical Volatility

A measure of a security's stability over a given period of time. While there are various ways to calculate it, the most common way is to compute the average deviation from the average price over the period of time one wishes to measure. The historical volatility is often compared to the implied volatility to determine if a security is overvalued or undervalued. Generally, securities with a higher historical volatility carry more risk. It is also called realized volatility or the standard deviation. See also: Volatility.

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standard deviation

A statistical measure of the variability of a distribution. An analyst may wish to calculate the standard deviation of historical returns on a stock or a portfolio as a measure of the investment's riskiness. The higher the standard deviation of an investment's returns, the greater the relative riskiness because of uncertainty in the amount of return. See also risk, variance.

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Standard deviation. Standard deviation is a statistical measurement of how far a variable quantity, such as the price of a stock, moves above or below its average value. The wider the range, which means the greater the standard deviation, the riskier an investment is considered to be.

Some analysts use standard deviation to predict how a particular investment or portfolio will perform. They calculate the range of the investment's possible future performances based on a history of past performance, and then estimate the probability of meeting each performance level within that range.

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Standard Deviation

What Does Standard Deviation Mean?

(1) A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. The standard deviation is calculated as the square root of the 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 also is 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 measure that helps shed light on an investment's historical volatility. For example, a volatile stock will have a high standard deviation, whereas the deviation of a stable blue-chip stock will be lower. A large dispersion indicates how much the return on an investment deviates from the expected normal returns.

Related Terms:
• Beta
• Bollinger Bands
• Coefficient of Variation—CV
• Covariance
• Volatility