standard deviation definition finance
The more spread apart the data, the higher the deviation. The standard deviation is calculated as the square root of the variance. (2) In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility.n analyst may wish to calculate the standard deviation of historical returns on a stock or a portfolio as a measure of the investment's riskiness. The higher the standard deviation of an investment's returns, the greater the relative riskiness because of uncertainty in the amount of return. See also risk, variance.