What Is standard deviation?

Introduction

Standard deviation is one way to measure how volatile an ETF's returns have been. It is a calculation done on the returns of an ETF, not on the ETF's market price. It measures how much an ETF's returns have varied over time. But a high standard deviation is not necessarily a bad thing, because it could be that a very volatile ETF has actually had a very high return over the long run. It just had lots of ups and downs to get there, causing it to have a high standard deviation. Standard deviation is used in the calculation of the Sharpe Ratio.

Our Calculations

Our calculations are done in the following manner:

We use a SQL query on our Microsoft SQL Server database to generate the standard deviations.

Examples

Here are the standard deviations of some ETFs that we have chosen just to illustrate what different standard deviations look like. It is sometimes hard to visualize the difference in two standard deviations when you are looking at a price chart, as shown in these examples.

EZU

EZU's standard deviation during its lifetime has been 21%, compared to SPY's standard deviation during the same time frame of 15%.


CEFL

CEFL's standard deviation during its lifetime has been 0%, compared to SPY's standard deviation during the same time frame of 0%.



All data is a live query from our database. The wording was last updated: 07/22/2017.

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