In this tutorial, you will learn how to calculate the coefficient of variation in Excel.
The coefficient of variation (CV) is a statistical measure of the spread of data points in a data series about its mean. The coefficient of variation expresses the ratio of the standard deviation to the mean and is a useful statistic for comparing the degree of variation from one data set to another, even when the means differ significantly.
The coefficient of variation indicates the amount of variability of the data within the sample relative to the population mean.
In finance, the coefficient of variation allows an investor to determine how much volatility or risk to expect in the expected return from an investment. Ideally, the trade-off between risk and return is better if the coefficient of variation formula results in a lower ratio of standard deviation to the average return.
Once ready, we’ll start by utilizing real-world examples to show you how to calculate the coefficient of variation in Excel.
Table of Contents
Coefficient of Variation Formula
CV = σ / μ
Where:
σ = standard deviation
μ = mean
Calculate the Coefficient of Variation in Excel
Before we begin we will need a group of data to calculate the coefficient of variation in Excel.
Step 1
First, you need to have a clean and tidy group of data.
Step 2
To find the coefficient of variation you will need to find the mean and standard deviation. To find the mean of the data group, you can insert this formula =AVERAGE(A2:A15).
Step 3
We then need to find the standard deviation of the data group with this formula =STDEV(A2:A15).
Step 4
We then insert the formula to find the coefficient of variation =D2/D1.
Step 5
Once we are done, you will find the coefficient of variation.
