how to calculate standardardized coefficient

Related: Return on Investment (ROI): Definition and Calculation Using the coefficient of variation Therefore, many analysts may also use the following formula to calculate the CV in terms of financial risk and reward: When applying the formula to business applications-like financial calculations-many professionals simplify the CV formula so it's relevant to financial measures like investment returns, capital gains, risk and investment volatility. In statistical analysis, the basic formula for calculating the coefficient of variation is:ĬV = standard deviation / sample mean x 100 The CV formula uses the standard deviation and the mean of your sample data to calculate a ratio to represent the dispersion of your values around the mean. Related: Definitive Guide to Understanding Descriptive Statistics What is the formula for the coefficient of variation? In financial and investment analysis where volatility and risk can influence potential returns, a lower CV means a lower risk-to-return ratio, indicating a better trade-off between the potential returns and the inherent risk of a particular investment instrument. When you evaluate the CV, you can represent the value with a percentage, where a lower percentage can indicate a lower CV and a higher percentage can mean a higher CV. It shows how much data varies in a sample in comparison to the mean of the population. Representing the standard deviation to the mean makes CV a valuable resource in comparing variations from one data series to another.

What is a coefficient of variation?Ī coefficient of variation (CV) measures data point dispersion around a mean.

How to calculate standardardized coefficient