As participants in any given activity improve across the board, says Mauboussin, the standard deviation shrinks.
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The standard deviation is calculated from all of the individual deviations of the data points.
Proof of this can be found in the standard deviation, a measure of how volatile annual returns were.
The last column in the table is also worthy of note, as it shows the standard deviation of returns.
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The standard deviation formula goes like this: 1.1 x the amount bet x the square root of the number of hands played.
For example, I just calculated the standard deviation of the temperatures measured at one instant by 14 weather stations located in my county.
Once you know the average return, the standard deviation of each index and the correlation coefficient between each pair of indexes, the rest is math.
The standard deviation of returns for quadruple witching expiration weeks is only 2.2% which is considerably less than typical weeks, with a standard deviation of returns of more than 3%.
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Other measures also suggest sentiment is running hot, including the spread between bullish and bearish sentiment (37.6 percentage points) and the standard deviation (bullish sentiment is more than one standard deviation above the historical mean).
The standard deviation in the National League that year was .063, meaning that a "typical" team had a winning percentage between 0.436 and 0.564 (we also weighted the deviation averages by division, since schedules had teams playing more games within their own division than outside of it).
The gray area around the average line shows the two standard deviation range of the data.
Table 3 below provides a summary of the annualized standard deviation and returns for each asset class, the weighted average risk and return and the total portfolio risk and return from January 1979 through December 2009.
Indulge me in a quick stat geek moment: the basic standard deviation formula marks greatness across eras by showing the degree to which you stand out from the crowd in a given year (a team with fewer patsies to beat up on will score higher than a team than a team feasting on more patsies, records being equal).
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The vertical axis (Y axis) is the compounded portfolio return and the horizontal axis (X axis) is portfolio risk as measured by the annual standard deviation of return.
In addition to the essay section, the Writing section of the SAT tests the deviation between standard written English and the way we actually speak the language.
Bullish sentiment is just slightly above one standard deviation from the historical average and bearish sentiment is within one standard deviation.
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That, combined with accurate card-counting and proper bet-sizing, will inevitably lead to winning, as long as enough hands are played beyond the effects of standard deviation issues.
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The table includes an annualized return, annual standard deviation of the technique, best and worst calendar year return, and the high and low amount in equity over the period.
Bearish sentiment has been at or above 41% during three out of the last four weeks, equaling or exceeding one standard deviation above the average.
The 500 stocks that make money consistently each of the last four quarters are weighted based on their daily standard deviation over the last 180 trading days, compared to their average.
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And when the ratio is as low as 0.911, one standard deviation, the market is signaling that small cap is relatively cheap and should outperform in the coming months.
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After all, for more than a decade, the number of start-ups acquired each year has averaged in the mid-300s, with a pretty tight standard deviation no matter the economic climate.
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Nine World Series champions--the first nine clubs on our list--have registered less than a full standard deviation above the mean in the year they won.
First, at least 33 percent by volume of the sales to an allegedly targeted group must be at prices that are less than one standard deviation below the average price to all other groups.
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The most efficient investments are those such that no other investment has a higher return for the same amount of standard deviation.
Thus, a reading above 50% for bullish sentiment would be one standard deviation above average and a reading of 41% for bearish sentiment would be one standard deviation above the average.
We sought to account for the variations of baseball's different eras with the tried and true tool of standard deviation, which allowed us to look past raw win totals to measure the degree to which a team stood above the pack in a given season.
The MSCI Emerging Markets Index is only about a half of a standard deviation from its mean over the same time frame.
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