How to Determine the Excel Coefficient of Variation
Excel simplifies a lot of extremely valuable and complicated computations for you to use in your daily life. A complex formula among them is the coefficient of variation. You can now discover how to apply this method to obtain fascinating insights about your data.
Our tutorial is suitable for both novice and experienced Excel users, as it is a simple and easy-to-read piece. Although we are using the most recent version of Microsoft Excel 2019, the procedures should be almost the same for older versions as well.
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What is the variation coefficient?
The coefficient of variation (CV) is a fascinating statistical measure that tells us about the relative dispersion of data points around the mean. It’s a handy tool that can help us understand how much variability there is in a dataset, and it can be super useful in a variety of fields. This is used to examine how the data differs in terms of spread when compared to the mean value.
One may calculate the coefficient of variation by dividing the mean by the standard deviation. This allows you to compare the spread of two random variables with different units in relation to the expected value and obtain comparable findings.
Examining investors provides a simple way to show how the coefficient of variance might be helpful in real-world situations. The coefficient of variation is a quantitative indicator of the risk involved in investing in an asset that is used in portfolio analysis.
The formula for the coefficient of variation in Excel
The following is the formula in Excel for the coefficient of variation:
- Mean / Standard Deviation equals the coefficient of variation.
- CV is equal to σ / ̩.
A helpful hint is to multiply the coefficient by 100 if you choose. You will obtain a percentage instead of a decimal by doing this.
How to use Excel to find a coefficient of variance
The steps to compute the coefficient of variation in Excel are provided below. Although the methods in our instruction are specific to the most recent software releases, they apply to all versions of the program.
- Open Microsoft Excel and select a workbook, or create a new one. Before following the guide, confirm that your worksheet has data.
- Locate the data set that you wish to utilize in order to determine the coefficient of variation. Cells A2 through A9 are used in our example; however, your data may differ.
- Determine the standard deviation first. Enter the following formula in any empty cell you choose: =STDEV(A2:A9). Be sure to swap out the cells that hold your data with the ones in our example! To compute the standard deviation, hit Enter.
- The mean should then be determined. Choose an additional blank cell and enter =AVERAGE(A2:A9) in it. Replace the sample cells with the appropriate ones containing your data once more.
- With these two numbers in hand, note the cells containing the values and choose another blank cell to compute the coefficient of variation. Put the function =D2/D3 into the input. Remember to substitute your numbers for our example ones.
- You are done when you hit Enter! With Excel’s formulas, you were able to compute the coefficient of variation.
Concluding remarks
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