compuvilla.blogg.se - Coefficient of variation easycalculator

Since City B has a lower CV, it has a lower standard deviation of incomes relative to its mean income. We can calculate the coefficient of variation for each city:

City B: Mean Income: $77,000, Standard Deviation = $6,000.

City A: Mean Income: $50,000, Standard Deviation = $5,000.

This means Company B can likely predict their weekly sales with more certainty than Company A.Įconomists often calculate the coefficient of variation for annual income in different cities to understand which cities have more inequality.įor example, consider the mean and standard deviation of annual incomes for residents in two different cities: Since Company B has a lower CV, it has lower volatility in weekly sales relative to the mean compared to company A. We can calculate the coefficient of variation for each store:

Company B: Mean Weekly Sales = $8,000, Standard Deviation = $2,000.

Company A: Mean Weekly Sales = $4,000, Standard Deviation = $1,500.

In the retail industry, companies often calculate the coefficient of variation to understand the variation of their revenue from one week to the next.įor example, consider the following mean weekly sales and standard deviation of weekly sales for two different companies: Since Mutual Fund A has a lower coefficient of variation, it offers a better mean return relative to the standard deviation.

The investor can calculate the coefficient of variation for each fund: Mutual Fund B: mean = 5%, standard deviation = 8.2% Mutual Fund A: mean = 9%, standard deviation = 12.4% In the finance industry, the coefficient of variation is used to compare the mean expected return of an investment relative to the expected standard deviation of the investment.įor example, suppose an investor is considering investing in the following two mutual funds: The following examples illustrate this phenomenon in different fields. In most cases, the lower the coefficient of variation the better because it means the spread of data values is low relative to the mean. The answer: There is no specific value for a coefficient of variation that is considered to be a “good” value. One questions that students often have is: What is considered a good value for a coefficient of variation? The higher the coefficient of variation, the higher the standard deviation relative to the mean. A CV of 1.5 means the standard deviation is 1.5 times larger than the mean.A CV of 1 means the standard deviation is equal to the mean.A CV of 0.5 means the standard deviation is half as large as the mean.

Simply put, the coefficient of variation is the ratio between the standard deviation and the mean. A coefficient of variation, often abbreviated CV, is a way to measure how spread out values are in a dataset relative to the mean.