# Beta Deviation vs Standard Deviation: Difference and Comparison

Beta Deviation is variability in price. In other words, Beta is used to measure a fund’s volatility related to other funds. While Standard Deviation, on the other hand, is a statistical tool that reports a fund’s volatility.

## Key Takeaways

1. The beta deviation measures the volatility of a stock or portfolio relative to the overall market. In contrast, the standard deviation measures the dispersion of data from its average value.
2. The beta deviation is used to assess the risk of a stock or portfolio, while the standard deviation is used to assess the variability of data.
3. While both measures are used in finance and statistics, their purpose and interpretation differ.

## Beta Deviation vs Standard Deviation

The difference between Beta and Standard Deviation is that Beta Deviation measures the risk of a market as a whole. In contrast, the Standard Deviation method tends to measure the risks created on individual stocks.

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The purpose of the evaluation is to make?

The measurement of a stock price related to the changes in the entire stock market is measured through Beta deviation. For those who do not know what volatility measurement means, it is a statistical measure of the scattering of returns for a particular security or marketing index.

Simply saying, if you measure higher volatility in a security or a marketing index, the risk is high too, and lower volatility indicates lower risks. But, in most cases, we see the higher volatility-higher risk situation happen.

## What is Beta Deviation?

Beta is a measuring method to measure the risk involved in an individual asset related to the market portfolio. The aim is to measure the sensitivity involved in marketing movements. In other words, it measures the fund’s volatility about other funds.

Let’s take an example in the case of stocks: Beta Deviation can be calculated by comparing the returns of the stocks to the returns of a stock index such as the S&P 500 or FTSE 100.

The primary aim of the comparison is to allow an investor to monitor the performance of a stock compared with the whole market’s performance.

Therefore, Beta measures the movements of stock prices, which relates to the changes in the whole stock market.

A beta value indicating 1 means that it is much more volatile and shows that the security performance is in line with the performance of the whole market. On the other hand, a beta value showing less than means it is less volatile.

## What is Standard Deviation?

Standard Deviation is a statistical measure that is used widely all over the world to measure a fund’s volatility. When measuring the volatility of an individual or a single stock, then Standard Deviation is used.

The standard deviation of returns decides the standard deviation of a stock portfolio for every stock, along with the connection of returns between each set of stock in the particular portfolio. An increase in standard deviation indicates higher volatility and the risks involved.

Riskier financial security will show a higher standard deviation than stable financial security or investment funds.  One needs to scale the standard deviation of one market in opposition to another to obtain a standard deviation.

With the help of standard deviations, investors can come up with precise data and meaningful conclusions. The prices that are moved with the increased standard deviations show strengths and weaknesses.

## Main Differences Between Beta Deviation and Standard Deviation

1. Beta and Standard deviation methods calculate an investment portfolio’s risk. The only difference between them is that beta deviation measures the volatility of a stock as a whole, whereas a Standard deviation calculates the risks of a stock individually.
2. Beta Deviation measures the performance of a portfolio or security about the movements in the market.
3. The risks of returns are calculated in standard deviation. This means that an increase in standard deviation increases the risk involved in a particular investment.
4. A beta value showing a value of more than 1 means that the security is performing in line with the performance of the market. Whereas when a beta value is less than 1, the market’s security performance is less volatile.
5. Standard deviations are mostly associated with more risks.
References

Last Updated : 11 June, 2023

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### 25 thoughts on “Beta Deviation vs Standard Deviation: Difference and Comparison”

1. The article’s exploration of Beta Deviation and Standard Deviation is a commendable effort in illuminating the disparate roles of these metrics in finance. The lucid comparisons underscore the significance of risk assessment.

1. Well stated. The article offers a meticulous dissection of these statistical measures, enriching the readers’ knowledge of risk evaluation in financial contexts.

2. The comparison of Beta Deviation and Standard Deviation provides a robust foundation for risk assessment in the financial landscape. This article successfully elucidates the crucial disparities between these metrics.

1. Absolutely. A meticulous exploration of these statistical measures enhances the readers’ aptitude for risk evaluation in investment portfolios.

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4. The article lacks practical examples to illustrate Beta Deviation and Standard Deviation. Theoretical knowledge is vital, but real-life applications would benefit the readers further.

1. You raise a valid point. Real-world case studies would enhance the comprehension of these complex metrics in the financial context.

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6. The distinction between Beta Deviation and Standard Deviation is well-articulated here, shedding light on their respective roles in evaluating risk. This is essential knowledge for any financial analyst.

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2. The article does a commendable job of providing thorough insights into these statistical tools, fostering a deeper understanding of risk analysis.

7. Although the article brings up valid points about Beta Deviation and Standard Deviation, it feels like it leans too heavily towards technical jargon. It could be made more accessible to a wider audience.

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2. I see what you mean. Simplifying the language could make this valuable information more approachable for all types of readers.

8. This article provides an excellent comparison of Beta Deviation and Standard Deviation, showcasing the importance of risk measurement in finance. Understanding these concepts is crucial for any investor.

1. Very well-written and informative. Investors will definitely benefit from this detailed analysis of Beta Deviation and Standard Deviation.

2. Absolutely, the clear explanation and examples make it easier for anyone to grasp these essential measurements in finance.

9. The article presents a scholarly discussion of Beta Deviation and Standard Deviation, but the absence of a critical analysis of limitations diminishes its value to a certain extent.

1. You make a valid observation. Including a discussion of the limitations of these statistical tools could enrich the depth of this article.

2. I agree. A critical examination of the drawbacks and potential shortcomings of these metrics would offer a more holistic perspective.

10. The detailed comparison of Beta Deviation and Standard Deviation is a comprehensive guide for anyone delving into the world of finance. The essential distinctions are outlined with precision in this article.

1. Absolutely. This thorough exploration of the nuances between these statistical measures presents a valuable resource for finance professionals and enthusiasts.

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