Today’s focus was CV(Coefficient of Variation).
It is used to measure “relative” variance and is indispensable when you compare the variance among the data sets with different averages.
Impact of standard deviation of $2,000 is not the same for a large store with average monthly sales of $500,000 and a small shop with sverage monthly sales of $5,000.
In such case, you have to cancel out the difference of the average (data scale), by dividing the standard deviation by the average, which makes CV.
A question in the class was which index you would like to invest your money and why. (Nikkei 225, NY Dow, and JPY/USD FOREX)
I was expecting the students to look at the recent trend in terms of value and risk among the index.
You may compare the value trend with monthly average and the risk with the CV.
In conclusion, only FOREX had upward trend and with lowest risk (CV), compared with other two.
I hope they enjoyed the team discussions in the class.
See you all next week!