Coefficient of Variation

This is the ratio of the standard deviation to the mean:

The coefficient of variation describes the magnitude sample values and the variation within them.  This is illustrated in the example below which shows the variation in a shop's daily takings with different values of the coefficient of variation, it is assumed that the takings are normally distributed.

When the coefficient of variation is 0.1, the fluctuation in the days takings is almost 400, whilst a value of 0.01 indicates smaller variations and a more stable trading environment.

Page updated: 29-Mar-2006

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