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How is volatility related to standard deviation?

How is volatility related to standard deviation?

Standard deviation, also referred to as volatility, measures the variation from average performance. If all else is equal, including returns, rational investors would select investments with lower volatility.

Does standard deviation indicate volatility?

Description. Standard deviation is the statistical measure of market volatility, measuring how widely prices are dispersed from the average price. If prices trade in a narrow trading range, the standard deviation will return a low value that indicates low volatility.

What is a high standard deviation for an ETF?

The standard deviation for most precious-metals funds is somewhere around 26.0.


Standard deviation shows the degree to which a stock/bond/mutual fund/ETF’s actual returns vary from its average returns over a certain time period.


For example, imagine two hypothetical ETFs and their returns …

What does standard deviation say about stock volatility?

Standard deviation is a measure of how much an asset’s return varies from its average return over a set period of time. Standard deviation is a commonly used gauge of volatility in securities, funds, and markets. A high standard deviation indicates an asset with larger price swings and greater risk.

Does higher standard deviation mean higher volatility?

Standard Deviation is used as a proxy for risk, as it measures the range of an investment’s performance. The greater the standard deviation, the greater the investment’s volatility.

What does a high standard deviation mean?

more spread out
A standard deviation (or σ) is a measure of how dispersed the data is in relation to the mean. Low standard deviation means data are clustered around the mean, and high standard deviation indicates data are more spread out.

How do you evaluate an ETF risk?

Since the job of most ETFs is to track an index, we can assess an ETF’s efficiency by weighing the fee rate the fund charges against how well it “tracks”—or replicates the performance of—its index. ETFs that charge low fees and track their indexes tightly are highly efficient and do their job well.

Is a high standard deviation good in stocks?

Standard deviation helps determine market volatility or the spread of asset prices from their average price. When prices move wildly, standard deviation is high, meaning an investment will be risky. Low standard deviation means prices are calm, so investments come with low risk.

What does higher standard deviation mean?

What is a high standard deviation for a stock?

When stocks are following a normal distribution pattern, their individual values will place either one standard deviation below or above the mean at least 68% of the time. A stock’s value will fall within two standard deviations, above or below, at least 95% of the time.

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