Standard deviation
of return measures the average deviations of a return series from its mean, and
is often used as a measure of risk. A large standard deviation implies that there
have been large swings in the return series of the manager.
Standard deviation can be calculated in two ways:
Standard Deviation assumes that the returns series is a sample
of the population. This is the calculation most commonly used. The standard deviation
of the return series is the square root of the variance:
StdDev(r1, …, rn) = 
where r1, …, rn is a return series, i.e., a sequence of returns for n time periods.
Population Standard
Deviation assumes that the return series is the population. Population Standard
Deviation is the square root of the population variance:
PStdDev(r1,
…, rn) = 
Related Statistics:
Annualized Return
Cumulative Return
Mean
