Skip to main content

๐Ÿš€ We're live on Product Hunt today โ€” your support means the world

Glossary ยท investing

What is Standard deviation?

A statistical measure of dispersion around an average return.

Last updated

In investing, standard deviation quantifies how much returns vary from their average. Higher standard deviation implies wider swings โ€” bigger gains and bigger losses.

It's the foundation of many risk metrics including Sharpe ratio and Value at Risk. Assumes a roughly normal distribution, which real market returns violate at the extremes (fat tails).

Practice this in Aurora

See a plain-English bull/bear/bias breakdown on any stock โ€” no signup needed.

Open Decision Lab โ†’

Frequently asked questions

Is one standard deviation always ~68%?

Under a normal distribution, yes โ€” but market returns have more extreme events than a normal distribution predicts.

Related terms