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Forums › ACCA Forums › ACCA APM Advanced Performance Management Forums › The interpretation of Coefficient of Variation
Hi Tutor,
Scenario:
Coefficient of variation = Standard deviation / Expected value (mean)
Investment X = 15% / 20% = 0.75, or 75%
Investment Y = 20% / 25% = 0.80, or 80%
I understand the interpretation of the risk to reward ratio, i.e. the higher the more relative to the deviation = riskier, but what does coefficient of variation actually tell us, for example:
Does it mean there is a 75% chance that the expected value will deviate by 15%?
or
Does it mean that the expected value will most probably deviate by 75% of the 15% (i.e. 11.3%)?
Looking forward for your reply.
Many thanks.
Best regards,
Kenny
This forum is primarily designed for students to help one another. If you want to ask the tutor something directly please use the ask the tutor forum-
Hope this helps.