Question
The coefficient of variation (CV) is a measure of relative variability equal to the ratio between the standard deviation divided by the mean, and formatted
The coefficient of variation (CV) is a measure of relative variability equal to the ratio between the standard deviation divided by the mean, and formatted to %. It is regularly used to compare risk (volatility) in investing, and is especially useful in to compare data on different scales or with different units of measure. Consider weights of 10 oz, 13.4 oz, 15.1 oz with SD of 2.597 oz. The corresponding weights in pounds 0.625 lb, 0.838 lb, 0.944 lb have SD 0.162 lb. The SDs are not equal, yet the sample and its variability are the same. How can we compare variabilities? The CV, unlike other measures of variability, does not depend on the units of measure. The units are divided out in dividing the standard deviation by the mean. For a "rule of thumb", a CV of greater than 5% is considered significant. So, the CV is also used to assess data with no prior history to compare to evaluate any trends.
When is the Coefficient of Variation (CV) especially useful?
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