Coefficient of variation (CV) is a statistical tool for defining the comparative variability of a particular data set. In other words, it indicates the distribution of the data points around the mean in a given data set. It is calculated in percentage (%) terms. It is used to understand the relative dispersion of data amongst various data series. A lower CV is always better. The Coefficient of Variation Calculator is an online calculator for quick calculation of a CV.
Standard deviation is divided by the average return for calculating CV. Mathematically presentation of the same is as follows:
Coefficient of Variation (CV) = (σ / x̄) * 100
Where σ = Standard Deviation
and x̄ = Average Return
Coefficient of Variation Calculator
How to Calculate Using Calculator?
The person accessing the calculator has to input the following mentioned particulars into it:
Average Return – Average return can be calculated on the basis of past returns on the investment or portfolio as well as expected future returns. It is the mean of returns. A total of the past years return is divided by the total number of years under calculation. This will help in arriving at an average return from past data. While the total of expected future returns multiplied by the probabilities of respective years is divided by the number of years under calculation. This will provide an average return from the future data. It is generally denoted by x̄.
Standard Deviation – Standard deviation is the volatility in the returns. It can also be computed on the basis of past and future data. It is denoted by σ. In the case of past data, it is the square root of total of (x – x̄)2 divided by the number of periods. However, in the case of future data, it is the square root of the probability of (x – x̄)2.
Excel Calculator – Coefficient of Variation
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Excel Calculator for Coefficient of Variation (19 downloads )