Coefficient of Variation

Coefficient of variation is a common measure of relative dispersion. Relative dispersion is the amount of variability in a distribution relative to a reference point or benchmark.

Formula

Usefullness

The coefficient of variation measures the amount of dispersion in a distribution relative to the distribution's mean. This is useful because it allows for a direct comparison of dispersion accross different sets of data.

In Finance

With investments, the coefficient of variation is often ued to measure the risk--variability--per unit of expected return--mean.