Measures of

Dispersion: Range,
Standard Deviation
and Variance
DOLOR SIT AMET

The Range (Statistics)
The Range is the difference between the lowest
and highest values.
The Range Can Be Misleading
The range can sometimes be misleading
when there are extremely high or low
values.
Example question 1: What is the range for the following set of
numbers? 10, 99, 87, 45, 67, 43, 45, 33, 21, 7, 65, 98?
Step 1: Sort the numbers in order, from smallest to largest:
7, 10, 21, 33, 43, 45, 45, 65, 67, 87, 98, 99
Step 2: Subtract the smallest number in the set from the largest
number in the set:
99 – 7 = 92
The range is 92
Example question 2: What is the range of these integers?
14, -12, 7, 0, -5, -8, 17, -11, 19
Step 1: Sort the numbers in order, from smallest to largest:
-12, -11, -8, -5, 0, 7, 14, 17, 19
Step 2: Subtract the smallest number in the set from the largest
number in the set:
19 – -12 = 19 + 12 = 31
The range is 31.
Problem 3: You take 7 statistics tests over the course of a semester. You
score 94, 88, 73, 84, 91, 87, and 79. What is the range of your scores?
Solution:
Step 1: Order your scores from smallest to largest:
73, 79, 84, 87, 88, 91, 94.
Step 2: Subtract the smallest number from the highest = 94 – 73 = 21.
Answer: 21.

Standard Deviation and Variance
Standard Deviation
The Standard Deviation is a measure of how
spread out numbers are.
Its symbol is σ (the greek letter sigma)
The formula is easy: it is the square root of
the Variance. So now you ask, "What is the
Variance?"
Understanding the Standard Deviation
Standard deviation is a statistical measurement in
finance that, when applied to the annual rate of return
of an investment, sheds light on that investment's 
historical volatility. The greater the standard deviation
of securities, the greater the variance between each
price and the mean, which shows a larger price range.
For example, a volatile stock has a high standard
deviation, while the deviation of a stable blue-chip
 stock is usually rather low.

What Is Standard Deviation?

A standard deviation is a statistic that measures
the dispersion of a dataset relative to its mean.
The standard deviation is calculated as the
square root of variance by determining each
data point's deviation relative to the mean. If the
data points are further from the mean, there is a
higher deviation within the data set; thus, the
more spread out the data, the higher the
standard deviation.
Calculating the Standard Deviation
Standard deviation is calculated as follows:
1.The mean value is calculated by adding all the
data points and dividing by the number of data
points.
2.The variance for each data point is calculated
by subtracting the mean from the value of the
data point. Each
Calculating the Standard Deviation
Standard deviation of those
is calculated
as follows:
squared and the results summed. The result is
then divided by the number of data points less
one.
3.The square root of the variance—result from
no. 2—is then used to find the standard
deviation.
Using the Standard Deviation
Standard deviation is an especially useful tool in
investing and trading strategies as it helps measure
market and security volatility—and predict performance
trends. As it relates to investing, for example, an 
index fund is likely to have a low standard deviation
versus its benchmark index, as the fund's goal is to
replicate the index.
resulting values is then
On the other hand, one can expect aggressive 
growth funds to have a high standard deviation from
relative stock indices, as their portfolio managers make
aggressive bets to generate higher-than-average returns.
A lower standard deviation isn't necessarily preferable.
It all depends on the investments and the investor's
willingness to assume risk. When dealing with the
amount of deviation in their portfolios, investors should
consider their tolerance for volatility and their overall
investment objectives. More aggressive investors may be
comfortable with an investment strategy that opts for
vehicles with higher-than-average volatility, while more
conservative investors may not.
Standard deviation is one of the key fundamental risk measures Standard deviations are usually easier to picture
 that analysts, portfolio managers, advisors use. Investment and apply. The standard deviation is expressed in
firms report the standard deviation of their mutual funds and the same unit of measurement as the data, which
other products.
isn't necessarily the case with the variance. Using
A large dispersion shows how much the return on the fund is
deviating from the expected normal returns. Because it is easy
the standard deviation, statisticians may determine
to understand, this statistic is regularly reported to the end if the data has a normal curve or other
clients and investors. mathematical relationship. If the data behaves in a
Standard Deviation vs. Variance normal curve, then 68% of the data points will fall
Variance is derived by taking the mean of the data points, within one standard deviation of the average, or
subtracting the mean from each data point individually, squaring mean, data point. Larger variances cause more data
each of these results, and then taking another mean of these points to fall outside the standard deviation.
squares. Standard deviation is the square root of the variance. Smaller variances result in more data that is close
The variance helps determine the data's spread size when
to average.
compared to the mean value. As the variance gets bigger, more
variation in data values occurs, and there may be a larger gap
between one data value and another. If the data values are all
close together, the variance will be smaller. However, this is
more difficult to grasp than the standard deviation because
variances represent a squared result that may not be
meaningfully expressed on the same graph as the original
dataset
 Formula
Example of Standard Deviation The below statistical formulas are employed to
Say we have the data points 5, 7, 3, and 7, which total 22. find the standard deviation for the frequency
You would then divide 22 by the number of data points, distribution table data set
in this case, four—resulting in a mean of 5.5. This leads
to the following determinations: x̄ = 5.5 and N = 4.

The variance is determined by subtracting the mean's

value from each data point, resulting in -0.5, 1.5, -2.5,
and 1.5. Each of those values is then squared, resulting in
0.25, 2.25, 6.25, and 2.25. The square values are then
added together, giving a total of 11, which is then divided
by the value of N minus 1, which is 3, resulting in a
variance of approximately 3.67.

The square root of the variance is then calculated, which

results in a standard deviation measure of approximately
1.915.
Example Problem: step 1: find the mid-point M for each group
In a class of students, 9 students scored 51 to 60, 7 students (50 + 60)/2 = 55.5
scored 61 to 70, 9 students scored 71 to 80, 12 students scored (61 + 70)/2 = 65.5
81 to 90 and 8 students scored 90 to 100 in the subject of (71 + 80)/2 = 75.5
mathematics. Estimate the standard deviation? (81 + 90)/2 = 85.5
(90 + 100)/2 = 95.5
Solution: The mid points are 55, 65.5, 78, 90.5 & 98 for the group of
Input: students 50 to 60, 61 to 70, 71 to 85, 86 to 95 & 96 to 100
Range F M FM repectively.
step 2: calculate the number of samples n
51-60 9 55.5 499.5 n = 9 + 7 + 9 + 12 + 8
n = 45
61-70 7 65.5 458.5
step 3: find the grouped data mean μ
71-80 9 75.5 679.5 μ = (55.5 x 9 + 65.5 x 7 + 75.5 x 9 + 85.5 x 12 + 95.5 x
8 )/n
81-90 12 85.5 1026 = 3427.5/45
μ = 76.16667 or 76.17
91-100 8 95.5 764

f = 45 Fm =
3427.5
Example Problem: step 3: find the grouped data mean μ
In a class of students, 9 students scored 51 to 60, 7 students μ = (55.5 x 9 + 65.5 x 7 + 75.5 x 9 + 85.5 x 12 + 95.5 x
scored 61 to 70, 9 students scored 71 to 80, 12 students scored 8 )/n
81 to 90 and 8 students scored 90 to 100 in the subject of = 3427.5/45
mathematics. Estimate the standard deviation? μ = 76.16667 or 76.17
step 4: find the variance
Solution:
Input:
 269741.25− ( 45 ∗76.17 2 )
Range F M FM M2 FM2 45 −1

51-60 9 55.5 499.5 3080.25 27722.25 21847171.9−

  (45∗ 5801.87 )
44
61-70 7 65.5 458.5 4290.25 30031.75
 21847171.9− 261 084.15
71-80 9 75.5 44
679.5 5700.25 51302.25
 8657.1 5  196.75
81-90 12 85.5 1026 7310.25 87723 44
step 5: find standard deviation for the grouped data
91-100 8 95.5 764 9120.25 72962 Take square root of variance

N = 45 ΣFM = ΣfM2
3427.5 =21847171.9 σ =  √  196.75 14.03
Example Problem:
In a class of students, 9 students scored 51 to 60, 7 students
scored 61 to 70, 9 students scored 71 to 80, 12 students scored
81 to 90 and 8 students scored 90 to 100 in the subject of
  269741.25 − ( 45 ∗76.17 2 )
mathematics. Estimate the standard deviation?

Solution:
Input:
√ 45 −1
  21847171.9 − (45∗5801.87 )
Range

51-60
F

9
M

55.5
FM

499.5
M

3080.25
2
FM 2

27722.25
√ 44
  21847171.9 − 261084.15
61-70

71-80
7

9
65.5

75.5
458.5

679.5
4290.25

5700.25
30031.75

51302.25
√ 44
  8657.15

√ 44
√  196.75
81-90 12 85.5 1026 7310.25 87723
σ =  14.03
91-100 8 95.5 764 9120.25 72962

N = 45 ΣFM = ΣfM2 σ2 = (14.03)2  = 196.75

3427.5 =269741.25
Example Problem:
In a class of students, 9 students scored 51 to 60, 7 students
scored 61 to 70, 9 students scored 71 to 80, 12 students scored
81 to 90 and 8 students scored 90 to 100 in the subject of
mathematics. Estimate the standard deviation?

Solution:
Input: 8680.00
 
Range f X fX mean /X-x / /X-x/2 F(x – x )2 45 −1
8680.00
 
51-60 9 55.5 499.5 76.17 20.67 427.25 3845.24 44

61-70 7 65.5 458.5 76.17 10.67 113.85 796.9423 σ2 = 197.27

71-80 9 75.5 679.5 76.17 0.67 0.45 4.0401

81-90 12 85.5 1026 76.17 9.33 87.05 1044.587 σ =  √  197.27

91-100 8 95.5 764 76.17 19.33 373.65 2989.191 14.05
N = 45 Σf(X-x)2
= 8680.00

https://www.youtube.com/watch?v=x6Pnf57wRAs https://www.youtube.com/watch?v=NhahVPv6CeM
Fm M2 FM2
fX mean /X-x / /X-x/2 F(x – x )2
f M Fm M2 FM2
f M fX mean /X-x / /X-x/2 F(x – x )2
https://www.youtube.com/watch?v=NhahVPv6CeM

https://www.investopedia.com/terms/s/standarddeviation.asp