standard deviation (redirected from deviation)

Standard Deviation

1. A measure of the dispersion of a set of data from its mean. The more spread apart the data is, the higher the deviation.

2. In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility (risk).

Notes:

A volatile stock would have a high standard deviation. In mutual funds, the standard deviation tells us how much the return on the fund is deviating from the expected normal returns.

Standard deviation can also be calculated as the square root of the variance.

See also: Beta, Bollinger Bands, Covariance, Mean, Tracking Error, Variance, Volatility

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Standard deviation

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

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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.