# General formula to understand standard deviation of a stock price over a time horizon?

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

The calculation steps are as follows:

1. Calculate the average (mean) price for the number of periods or observations.
2. Determine each period’s deviation (close less average price).
3. Square each period’s deviation.
4. Sum the squared deviations.
5. 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:

1. Work out the Mean (the simple average of the numbers)
2. Then for each number: subtract the Mean and square the result.
3. Then work out the mean of those squared differences.
4. 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.