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s w Conversely, suppose an economist measures the total income tax collected in all 50 states in the U.S. and finds that the sample mean is $400,000 and the standard deviation is $480,000. Some traders consider a VIX value greater than 30 to be relatively volatile and under 20 to be a low volatility environment. A coefficient of variation, often abbreviated as CV, is a way to measure how spread out values are in a dataset relative to the mean. The steps in calculating the standard deviation are as follows: For each value, find its distance to the mean. You can also use it compare observations of a parameter to the best known value of that parameter as a way to gauge accuracy of an experimental method or measurement tool. You can learn more about Excel modeling from the following articles: . {\displaystyle \mu _{k}} Absolute Deviation & Variance | How and when to use these - Laerd Implied volatility is determined using computational models such as the Black-Scholes Model or Binomial Model. The RSD is often referred to as the coefficient of variation or relative variance, which is the square of the coefficient of variation. For this reason, many traders with a high-risk tolerance look to multiple measures of volatility to help inform their trade strategies. c In general, when volatility is rising in the stock market, it can signal increased fear of a downturn. Economists often calculate the coefficient of variation for annual income in different cities to understand which cities have more inequality. s where: Standard deviation is a statistical measurement of the amount a number varies from the average number in a series. = Many successful growth investors, such as William J. O'Neil, look for stocks that go up more than the market in an uptrend but stay steady during a downtrend. From the source of Libretexts.org: Measures of the Spread of Data, Sampling Variability of a Statistic.