How To Calculate Standard Deviation In Excel
Standard deviation is used in research, finance, and statistics. This video shows you how easy it is to use Microsoft Excel to calculate a standard deviation and how to interpret that number.
Hi, my name is Grant Hobson. I work as a financial analyst, and today, I am going to take you through some business math calculations and ratios. How to calculate standard deviation in Excel? Standard deviation is basically looking at the dispersion of a set of data around an average point.
It is used in research and statistics to analyze a set of data. A low standard deviation is when a lot of your data points are around your average point. Whereas, a high standard deviation is when they, data points are vastly dispersed, and sort of more scattered on your chart when you look at where your data points are.
You can calculate this manually or it's quicker just to use the Excel function. So, we will run through that now in an example. Prior to the calculation, we need to identify the data set that we want to calculate the standard deviation for.
So, in this case, we are going to take a six month period, and six different data sets - which is the price to fill up a car in a month. Month 1 is 50 pounds, month 2 is 48 pounds, month 3 is 47 pounds, month 4 is 49 pounds, month 5 is 53 pounds, and month 6 is 57 pounds. You see the data is quite dispersed.
Basically, what the standard deviation will do is take the average of this set of data and just determine how much they vary to that average. The standard deviation of this data is 3.72, and it has been previously calculated.
So, now I will show you how the function works to get you to 3.72. If you have Excel 2007, the method will be slightly different to an older version of Excel.
So, in the older versions, you will need to go to insert at the top, and I think you can insert your function and you will do a search for standard deviation like we are going to do. For this version of Excel, simply go to Formulas at the top tab. Insert Function, type: standard deviation.
Search for it and there are quite a few different ones here. So, we are going to take this one which has to make standard deviation based on this sample here. So, now it asks for me to select my range, and the range that I want is this data range here.
It is actually that selected there. Select OK, and that gives me a standard deviation of 3.72.
So, you can calculate the standard deviation for a variety of sets of data and compare how volatile they are, so in finance, standard deviation is deemed to be your volatility. So, if you are invested in shares and stuff, you can determine how volatile a certain type of stock is, and that is the risk on your investment. .