Plain-English definitions, reviewed by an independent investor
Variance
Variance is the average of squared deviations from the mean — the squared cousin of standard deviation.
Variance is the average of squared deviations from the mean — the squared cousin of standard deviation.
Variance = Average of (Return − Mean)²
Why it matters
It is the raw risk measure that standard deviation tames by square-rooting.
Common confusion
Its squared units make it awkward to quote, so SD is preferred in practice.
Frequently Asked Questions
Variance vs SD?
SD is the square root of variance, in the same units as returns.
Why square deviations?
So ups and downs both add up instead of cancelling.