##### Asked by: Melanie Ware

## How do you calculate the standard deviation of a stock?

**The calculation steps are as follows:**

- Calculate the average (mean) price for the number of periods or observations.
- Determine each period’s deviation (close less average price).
- Square each period’s deviation.
- Sum the squared deviations.
- Divide this sum by the number of observations.

## How do you interpret the standard deviation of an investment?

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**.

## How do you interpret the standard deviation of a stock return?

Understanding the Standard Deviation

**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 one standard deviation of a stock price?

10 Things to Know About Standard Deviation

**Implied volatility** refers to the one standard deviation range of expected movement of a product’s price over the course of a year. If a $100 stock has a 20% implied volatility, the one standard deviation range of price outcomes would be between $80 and $120 for the year.

## How do you find standard deviation explain with an example?

**To calculate the standard deviation of those numbers:**

- Work out the Mean (the simple average of the numbers)
- Then for each number: subtract the Mean and square the result.
- Then work out the mean of those squared differences.
- Take the square root of that and we are done!

## How do you calculate the standard deviation of a stock in Excel?

Using the numbers listed in column A, the formula will look like this when applied: **=STDEV.** **S(A2:A10)**. In return, Excel will provide the standard deviation of the applied data, as well as the average.

## How do you interpret standard deviation in descriptive statistics?

A low standard deviation indicates that the data points tend to be close to the mean of the data set, while a high standard deviation indicates that the data points are spread out over a wider range of values.