![]() Consequently, in some cases, the standard deviation is used to determine market volatility as it is easier to calculate. Also, variance is not easily interpreted. Outliers (numbers that lie far from the mean) enjoy an added advantage and the square of the differences between outliers and the mean can result in huge values, thus skewing the ultimate results. ![]() The variance comes with its own disadvantages. The method of using variance to calculate variability from mean and other data is advantageous over the use of other methods like arranging numbers in a quartile because it returns the same value without taking into consideration the direction of deviation. It is calculated by dividing the square of the differences between the specific number and the mean in a data set by the number of observations on the data sheet. The square root of variance returns the standard deviation which is instrumental in determining the risk factor associated with an investment and consequently the profit it returns. It is a factor used by experts to determine market volatility and market security. ![]() In a data set, variance refers to a statistical measurement of the distance of each number from the mean and thereby from every other number. ![]()
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