Co efficient of Variation Formula

Co efficient of Variation Formula

Co efficient of variation represents the investment risk. Co efficient of variation may be calculated by following formula

Coefficient of variation =            Standard deviation

                                                Expected Value

High coefficient of variance represents high investment risk.

Example

Company                               A                  B

Expected Return                    6%                8%

S.D                                      2%               6%

Solution

Coefficient of variance =            Standard deviation

                                                Expected Value

Company A= 2/6

=.333

Company B= 6/8

=.75

Company B has high coefficient of return, therefore company b carries high investment risk.