Standard Deviation of Returns

What is Standard Deviation?

Standard deviation quantifies how widely an investment's periodic returns are spread around their mean. A higher standard deviation signals greater volatility and, by extension, higher risk: in any given period the actual return may deviate substantially from what an investor expects. A lower standard deviation suggests steadier, more predictable returns. In portfolio management, standard deviation is the foundational risk input to Sharpe and Sortino ratios, Modern Portfolio Theory, and mean-variance optimization. The calculator uses the sample formula (N−1 denominator), which is standard practice when working with historical return data rather than the full population of possible returns.