STANDARD DEVIATION, COEFFICIENT VARIATION, VARIANCE

CLINICAL CLERK

TRIPATHI PRAVEEN
PRASHANT
 STANDARD DEVIATION
● The standard deviation calculates how far apart from the mean each piece of data
is on average.
● It differs from the mean deviation in that instead of obtaining the absolute value,
it squares each deviation before finding its square root.
● For statisticians, the most widely used indicator of dispersion is standard
deviation.
STANDARD DEVIATION
What is the difference between the Population and a Sample?
Standard deviation formula for Populations
The formula for Population standard deviation
 Sample Standard Deviation

● The root-mean square of the differences between observations and

the sample mean, s j = σ ^ j , is called the sample standard deviation: s
j=1N∑t=1N(Xjt−X¯j)2.
● Two or more standard deviations from the mean are considered to be a
significant departure.
● In practice, it is rare to calculate the value of mu since populations are
usually very large. Instead, it is far more likely that the sample standard
deviation (denoted by S) will be required.
● The formula for calculating S is not the same as simply substituting S for
and n for N. There are good theoretical reasons for not doing so.
 The use of n-1

● If we did this, and used the value of S to estimate the value of, the result
would be too small.
● To correct this error, instead of dividing by n we divide by (n-1). This
results in the following formula for S:
The Formula for Samples
 Standard deviation example
A market researcher, Gavin, was interested in the discrepancy in the prices charged by supermarkets
for a leading brand of pet food. To check this he selected a random sample of 12 stores and recorded the price
displayed for the same 400 gram can.
The prices in cents were

Find
a) the mean
89
b) the range of prices 72 77 78 82 94
c) the mean deviation of prices
d) the standard deviation of prices
Mean= 81
 Important points about the Standard Deviation

● Negative standard deviation is not permitted.

● The higher the standard deviation, the more erratic the data
● If and only if all of the observations have the same value, the standard
deviation of a set of data is zero.
● The standard deviation of a calculated result should be roughly 30% of
the range to be considered "fair," according to a general rule.
 Important points about the Standard Deviation

● The standard deviation must never be greater than the data range.
● The standard deviation is more influenced by extreme values than the
mean deviation due to the squaring process used in its calculation, and is
often slightly bigger than the mean deviation.
● Variance is the term for the square of the standard deviation.
Variance
The term variance refers to a statistical measurement of the spread between
numbers in a data set.
 KEY NOTES ABOUT VARIANCE:

● Variance is a measurement of the spread between numbers in a data set.

● In particular, it measures the degree of dispersion of data around the
sample's mean.
● Investors use variance to see how much risk an investment carries and
whether it will be profitable.
● Variance is also used in finance to compare the relative performance of
each asset in a portfolio to achieve the best asset allocation.
● The square root of the variance is the standard deviation.
VARIANCE
Variance = (Standard Deviation) 2
 Coefficient of variation

● The coefficient of variation (CV) is the ratio of the standard deviation

to the mean and shows the extent of variability in relation to the mean of
the population. The higher the CV, the greater the dispersion.
● It is used to measure the changes that have taken place in a population
over time, or to compare the variability of two populations that are
expressed in different units of measurement.
● It is expressed as a percentage rather than in terms of the units of the
particular data.
 KEY NOTES ON CO-EFFICIENT VARIATION
● The co-efficient of variation (CV) is a statistical measure of the relative
dispersion of data points in a data series around the mean.
● It represents the ratio of the standard deviation to the mean.
● The CV is useful for comparing the degree of variation from one data
series to another, even if the means are drastically different from one
another.
● In finance, the co-efficient of variation allows investors to determine how
much volatility, or risk, is assumed in comparison to the amount of return
expected from investments.
● The lower the ratio of the standard deviation to mean return, the better
risk-return tradeoff.
FORMULA FOR CO-EFFICIENT VARIATION
THANK YOU!