Coefficient of Variation (CV) Calculator
Statistical tool for risk-adjusted return analysis. Computes CV, Standard Deviation, and Mean, employing IQR logic to handle outliers in financial or QC datasets.
About
Standard deviation alone implies magnitude but lacks context. The Coefficient of Variation (CV) normalizes variability relative to the mean, allowing for the direct comparison of datasets with vastly different units or scales. For investors, a lower CV indicates a better risk-adjusted return (less volatility per unit of return). For quality control engineers, it quantifies process stability regardless of the product size.
This tool applies Interquartile Range (IQR) logic to filter outliers before calculation, ensuring that extreme anomalies do not skew the volatility assessment. This is critical when analyzing financial tickers subject to flash crashes or sensor data with transient errors.
Formulas
The Coefficient of Variation is the ratio of the standard deviation to the mean:
Where standard deviation σ for a sample is:
Reference Data
| CV Range | Interpretation (Finance) | Interpretation (Manufacturing) | Risk Level |
|---|---|---|---|
| < 0.05 | High Certainty | Six Sigma potential | Negligible |
| 0.05 - 0.15 | Stable Blue Chip | Standard Tolerance | Low |
| 0.15 - 0.30 | Growth Stock | Process Drift | Moderate |
| 0.30 - 0.50 | Speculative | Retooling Required | High |
| > 1.00 | Distressed Asset | System Failure | Extreme |