Standard deviation
Roughly how far a typical value sits from the average. Small means the values are consistent; big means they are all over the place.
In plain English
Take how far each value is from the average, square those distances, average them (that's the variance) and take the square root. The result is in the same units as the data. When data has the usual bell shape, about two thirds of the values fall within one standard deviation of the average.
Uncle Gary explains
Two pubs both average 70°F. In one, every reading is within a degree of 70. In the other, it's 85 by the fireplace and 55 by the door. Same average, standard deviations of about 0.6 and 11.4 degrees, and only one of them requires a coat indoors.
Why it matters for your money
In finance, the standard deviation of returns is the usual measure of volatility. Two strategies with the same average return can have very different swings along the way.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.