Standard deviation has many applications in the world, both in business and personal use. For instance, it can be used to determine what mutual funds would be wise to invest in. Standard deviation is a popular method used by investors because it can provide a precise measure of a funds variances during a particular time frame (News.morningstar.com, 2015). It can show these variances both on the upside and downside (News.morningstar.com, 2015). By analyzing standard deviation, one can determine what range future returns will likely be in (News.morningstar.com, 2015). If a funds returns fluctuate more month to month, than the standard deviation is going to be greater on these funds (News.morningstar.com, 2015). An example of this method actually being used is by the Morningstar Company. In order to inform its clients about the risks and benefits of each individual mutual fund they offer, one of the pieces of information they show is the standard deviation for the most recent 36 months of each mutual fund (News.morningstar.com, 2015).
Standard deviation is also commonly used in sports betting. Hard core sports betters determine a standardized curve by using standard deviation and the average. This creates a curve which can be used to determine probabilities of different events happening (Cortis, 2015). For instance, we can determine a specific soccer team is likely to only score between a certain number of goals in a game. A better can use these odds to determine what team to bet on. The goal differences between home and away games can also be determines (Cortis, 2015). As each variable is looked at, a person betting can make a better educated decision about what team to put their money on.
References
Cortis, D. (2015). How to use standard deviation for betting. Guest. Retrieved 9 July 2015, from http://www.pinnaclesports.com/en/betting-articles/betting-strategy/how-to-use-standard- deviation-for-betting
News.morningstar.com,. (2015). Standard Deviation. Retrieved 9 July 2015, from http://news.morningstar.com/classroom2/course.asp?docid=2927&page=2
