Which investing measure shows how much a portfolio’s return varies around its average return?

Standard deviation measures how much an investment portfolio’s returns vary around their average return.

In investing, a higher standard deviation usually indicates that historical returns have fluctuated more widely. A lower value suggests that returns have been closer to the portfolio’s average. The measure is therefore commonly used as an indicator of historical volatility and risk.

Standard deviation does not predict whether the next return will be positive or negative. It also does not distinguish between harmful losses and unusually strong gains; both contribute to variation. Investors often compare it with expected return and other risk measures.

The calculation uses the differences between individual returns and their average, squares those differences, averages them according to the relevant formula, and takes the square root. Because results depend on the period and frequency chosen, two sites can report different values for the same investment.