# Standard Deviation and Risk

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What is the importance of the standard deviation in interpreting and drawing conclusions about risk?

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Standard Deviation as a Measure of Risk

The standard deviation is often used by investors to measure the risk of a stock or a stock portfolio. The basic idea is that the standard deviation is a measure of volatility: the more a stock's returns vary from the stock's average return, the more volatile the stock.

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Standard Deviation as a Measure of Risk

The standard deviation is often used by investors to measure the risk of a stock or a stock portfolio. The basic idea is that the standard deviation is a measure of volatility: the more a stock's returns vary from the stock's average return, the more volatile the stock.

The standard deviation formula is very simple: it is the ...

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