Standard Deviation

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YCharts has 3 types of Standard Deviations: Daily, Monthly, and Annualized Monthly.

The Daily Standard Deviation is the standard deviation of the daily returns of a security.

The Monthly Standard Deviation is the standard deviation of the monthly returns of a security.

The Annualized Monthly Standard Deviation is an approximation of the annual standard deviation. To approximate the annualization, we multiply the Monthly Standard Deviation by the square root of (12).


Example: Calculating the Standard Deviation of Monthly Price Returns (5Y Lookback)

We will begin by calculating the monthly returns every day for the past 5 years (1/1 - 2/1, 1/2-> 2/2, etc ...). This is 1260 periods (252 trading days * 5 years). We calculate the annualized standard deviation using these returns.

Other providers may calculate the standard deviation of a 5 year lookback by only looking at month-ends (1/30 to 2/28, 2/28 to 3/31, etc). This results in using 60 periods (5 years * 12 months) to calculate the standard deviation.

YCharts chooses to use the daily monthly returns since a monthly return does not only occur on month end, they occur mid-month as well.

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