The formula for coefficient of variation is given below. It is also called a coefficient of variation.
A data set of 90 100 110 has more variability.
Coefficient of variation formula class 11. In the above relative standard deviation formula. The formula for the relative standard deviation is given as. Thus in the investment scenario the formula of the coefficient of variation should be cv volatility expected return x 100.
Formula for coefficient of variation. Coefficient of variation is given by. Generally an investor seeks a security with a lower coefficient of variation because it provides the most optimal risk to reward ratio with low volatility but high returns.
C v s x x 100. Rsd s 100 x bar. Lower the deviation the close the numbers are dispersed from the mean.
Mathbf coefficient of variation frac standard deviation mean times 100. Larger the deviation further the numbers are dispersed away from the mean. Learn maths with all ncert solutions class 6 class 7 class 8 class 9 class 10 class 11 class 12 learn science with notes and ncert solutions class 6 class 7 class 8 class 9 class 10 teachoo provides the best content available.
When the value of the coefficient of variation is lower it means the data has less variability and high stability. Its standard deviation is 30 78 and its average is 27 9 giving a coefficient of variation of 30 78 27 9 1 10. Coefficient of quartile deviation frac q 3 q 1 q 3 q 1 times 100.
Naturally the investment having a lower degree of volatility is the safer one. A data set of 1 5 6 8 10 40 65 88 has still more variability. Mathbf coefficient of variation frac standard deviation mean times 100 as per sample and population data type the formula for standard deviation may vary.
Coefficient of variation in financial terms is also referred to as volatility of the investment. The formula for coefficient of variation is given below. Coefficient of variation is calculated using the formula given below coefficient of variation standard deviation mean coefficient of variation a 22 982 61 2 0 38 coefficient of variation b 30 574 51 8 0 59.
Where x 1 n i 1 n f i x i is the sample mean of x n total number of observations s x v x is the standard deviation of x s x 2 v x 1 n i 1 n f i x i 2 x 2 is the variance of x. Its sample standard deviation is 10 and its average is 100 giving the coefficient of variation as 10 100 0 1. Using the values for q1 and q3 now we can calculate the quartile deviation and its coefficient as follows quartile deviation semi inter quartile range frac q 3 q 1 2 frac 22 13 75 2 frac 8 25 2 4 125.
However the low coefficient is not favorable when the average expected return is below zero.