A standard deviation tells us how much specific examples vary from the average in a particular set. Thus, the larger the standard deviation, the more diverse/volatile are the examples. The more volatile the examples, the less predictable and riskier are the results. In short, standard deviation is used to measure/quantify investment risk. If a set of prices, for example, is close to the average ( mean), then we have a low standard deviation and more stable results. By comparing standard deviations for various investments, we can compare the consistency of performance among those various investments. The CENTER ONLINE Futures Glossary
————
A statistical measure of the extent to which measurements vary from their mean. A quantification of the dispersion for a set of data. For example, if the high temperature each day in one four-day period was 70 degrees, 71 degrees, 69 degrees, and 70 degrees, that four-day period has a mean ( average) high temperature of 70 degrees. A second four-day period might have high temperatures of 70 degrees, 60 degrees, 80 degrees, and 70 degrees. That second period also has an average high temperature of 70 degrees. Even though both four-day periods had the same average high temperature, they were quite different. In the first period, the standard deviation is quite small. There is little dispersion. In the second period, the standard deviation is much larger. American Banker Glossary
————
The square root of the variance. A measure of dispersion of a set of data from its mean. Bloomberg Financial Dictionary
* * *
* * *
A statistical measure of the amount by which one value in a range of values is likely to vary from the mean value. It is used as a method of assessing how variable or volatile a price is likely to be. The bigger the standard deviation the more widespread are the price movements and the more volatile the performance of the stock or financial instrument.
* * *
standard deviation UK US noun [C or U] GRAPHS & CHARTS, MEASURES
► a measurement of the degree to which each number in a set of numbers is different from the average: standard deviation from sth »
A fund's performance is measured using its standard deviation from the average profits of all the funds in its category.
Financial and business terms. 2012.