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Understanding Standard
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datapig March26,2014 BusinessStatistics,Excel
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StandardDeviationisoneofthosestatisticaltermsthrown
aroundthecorporateworldwithvagueabandon.Manybusiness
analystsdonttrulyunderstandtheconceptofStandard
Deviation.Ifyoureoneofthosefolks,youcanstoplivingthelie.
IntodaysPulitzerworthypost,youlllearnhowthis
underestimatedstatisticalmeasurecanhelpyoubetter
understandthedatayoureworkingwith.
.

WhatStandardDeviationMeasures

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Directories

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Butifyoulookcloser,youllseethatoneofthemanagershas
weeklyordersof22,34,58,52,10and21boxes.Forthis
manager,theaveragemaybemathematicallycorrect,butit
hidesthevolatilityofhisweeklyorders.Inotherwords,
sometimestheaverageofadatasetdoesntdoagoodjob
representingthedata.ThisiswhereStandardDeviationcomes
in.

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.
StandardDeviationgivesyouasenseofhowdispersed(spread
out)thedatainyoursampleisfromtheMean(Average).Said
anotherwayitletsyouknowifyoucanrelyontheMeanto
giveyouameaningfulrepresentationofthedata.

ExcelGuru
PowerPivotPro
PTSBlog
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YourSumBuddy

.
Inourexample,weusetheSTDEVfunctioninExceltogiveus
StandardDeviationalongwithourMean.

Recent Comments
CarlFarringtononBe
CarefulDrillinginto
PivotTableswithSlicers
RodonAvoidingDataCut
OffinExcel
IriononBeCarefulDrilling
intoPivotTableswith

Inthecaseofthefirstmanager,theStandardDeviationis2.
Thistellsusthateachdatapointinthesamplesitsanaverage
distanceof2statisticaldatapointsfromtheMean(Average).Is
thatgood?Well,thinkofitthiswayaStandardDeviationof0
wouldsayeverydatapointisexactlyequaltoMeanofthe
sample(32.3inthiscase).SoaStandardDeviationof2isnot
farofffromthat,indicatingthatamajorityofdatapointsare
positionedextremelyclosetotheMean.TheclosertheStandard

Slicers
flavioHenriqueonEditing
ShapePointstoCreate
CustomGraphics
RobonFilltheEmptyCells
LeftbyPivotTableRow
Fields
safderonColorPieChart

Deviationisto0,themorereliabletheMeanis.Morethanthat
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though,StandardDeviationcloseto0tellsusthatthereisvery

SlicestoMatchtheir

littlevolatilityinthesample.WithaStanadardDeviationof2,the

SourceCells

firstmanagersweeklyordersareremarkablyconsistent.

bethonExcel2010Slicers
KerionBeCarefulDrilling

intoPivotTableswith

Inthecaseofthesecondmanager,theStandardDeviationis

Slicers

18.9.TheaveragedistanceeachdatapointisfromtheMeanis

AlessioonHackinto

18.9statisticaldatapoints.Thatsahugespread!Thefurther

PasswordProtectedVBA

awayaStandardDeviationisfrom0,thelessaccuratetheMean

Projects

forthatsample.Inthiscase,aStandardDeviationof18.9alerts

AayaanshahonHackinto

usthattheAverageshownforthismanager(32.8boxesper

aprotectedExcel2007or

week)isjustnotreliable.Italsoindicatesthatthismanagers

2010Workbook

weeklyordersareextremelyvolatile.Ofcourse,withonlysix
datapoints,youcanconfirmthevolatilitywithyoureyeball.
.
ThatisbasicStandardDeviationinanutshell.Althoughitdoesnt
gettheattentionaffordedtootherstatisticalmeasures(Mean,
Median,Mode,etc.),StandardDeviationisactuallycriticalto
manystatisticalcalculations.AnunderstandingofhowStandard
Deviationworkswillpavethewayforyoutodothingslike:
determinethevolatilityofastock,normalizecomparisons
betweendatasets,identifyoutliers,createstandardizedz
scores,andmuchmore.

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HowStandardDeviationisCalculated

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Wellstartwiththissetofnumbers(inblack).Asyoucansee,

ExcelNumberFormatting

IvealreadyusedtheSTDEVfunctiontocalculatetheStandard

(14)

Deviationof21.6(inorange).

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MSQuery(4)
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PivotTables(35)
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HerearethestepsExceltooktocalculate21.6astheStandard
Deviation.

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First,ExcelcalculatestheMean(theAverage)fortheSample.In
thiscase,theMeanis40.Itthencalculatesthedifference
betweeneachdatapointand40.Forinstance,thedifference
between50and40is+10statisticaldatapoints.Thedifference
between10and40is30.

.
.
ThenextthingExceldoesisSquaresthosedifferencessothat
allthedifferenceswillbeapositivenumber(+10wouldbecome
10030wouldbecome+900).

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.
.
ExcelthenaddsupalltheSquaredDifferencestogettheTotal
SquaredDifferences.

Next,ExcelusestheTotalSquaredDifferencetocalculatethe
SampleVariance.ThisisdonebydividingtheTotalSquared
Differencesbythecountofdatapointsinthesampleminus1.In
thisexamplethecountofdatapointsis7,sowedividetheTotal
SquaredDifferencesby71.

.
.
Finally,ExcelcalculatesthesquarerootoftheSampleVariance.
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ThissquarerootbecomesourStandardDeviation.

.
.

PopulationStandardDeviationvsSample
StandardDeviation
Instatistics,youlloftenhearthetermsPopulationandSample.
Thesetermsrefertothecompletenessofthedatainyour
possession.Thedifferencesbetweenthetwoaresometimesnot
allthatclear.
.
Ifyoureusingacompletedataset,youreusingapopulation.
Anexampleofapopulationwouldbeifyouwereanalyzingthe
timeinserviceforallthesalesrepsinyourcompany.Youwould
havethedataforallthesalesrepsthatexistinyourcompanya
completepopulation.
.
Ifyouareusingapartialsetofdata,orasubsetofdata,youre
dealingwithwhatiscalledasample.Anexamplewouldbeif
youwereanalyzingsalesdataforonequarterofayear.A
quarterismerelyasubsetofanentireyearsdata,sointhis
case,youreworkingwithasample.
.
Thereasonthispopulationandsampledesignationmattersis
becausethecalculationforStandardDeviationchangesslightly
dependingonthenatureofthedatayouredealingwith.
Specifically,thewayyoucalculatetheSampleVariancechanges.
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RememberinStep4ofthecalculationstepsabove?Wesaid
thatExceldividestheTotalSquaredDifferencesbythecountof
datapointsinthesampleminus1.Well,thisonlyappliesifyour
dataisasample(asubsetofabiggerdatapool).

.
Ifyourdataismadeupoftheentirepopulation,thecalculationin
Step4changestodividetheTotalSquaredDifferencesbythe
completecountofdatapoints.Inotherwords,thereisnoneed
tosubtract1.

.
Thisdifferenceincalculationwillobviouslyyielddifferent
StandardDeviations.

.
Sowhythedifferenceincalculation?Well,thedifferenceisnot
anExcelquirk.ItsanactualstatisticstenentcalledBessels
Correction.BesselsCorrectionstatesthatwhenyouusea
sampledatasetinsteadofapopulation,youneedtosubtract1
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fromthecountofdatapointsused(writteninthestatisticsworld
asN1).Thiscorrectionaccountsforthebiasintroducedby
estimatingaMeanusingasubsetofdatainsteadofusingthe
truepopulationMean.Thereasoningbehindtheneedforthis
correctionisadmittedlyabitdifficultforusnonmathgeeksto
wrapourbrainsaround.Illtrytoexplainitinmysimplified
understanding.
.
Whenyouuseasample,youreusingasubsetofdatachosen
fromthetruepopulation.Inthiscase,youwonthavethebenefit
ofusingthetruepopulationMean.Youwillneedtoestimatea
newMeanbasedondatayougrabbedinthesample.This
estimatedMeanisalreadybiasedtowardsfittingthedata
choseninthesample,soyouneedtoexcludethatonepoint(the
estimatedMean)fromcalculatingtheSampleVariance.Thisis
calledlosingadegreeoffreedom.Anotherwaytolookatitis
this.IfIsaidyoucouldhavefivevariablesinanExcelformula,
butoneofthemwouldhavetobeusedtocalculatetheMean,
youwouldhaveonlyfourvariablesavailabletoyou(51).The
factthatyouhavetocalculateMeanlosesyouadegreeof
freedom.
.
Ifyouuseapopulationsetinsteadofasampleset,youhavethe
benefitofthetruepopulationMean.Soyourenotlosinga
degreeoffreedombybeingforcedtointroduceanestimated
Mean.Thusthereisnoneedtosubtract1.
.
.

StandardDeviationFormulasinExcel
ExcelhastheabilitytohandleStandardDeviationcalculations
forbothpopulationandsampledatasets.Simplyclickinanycell
andstarttoentera=STDEV.Youllseeatooltipdropdownthat
givesyou,whatseemstobe,aridulousnumberofStandard
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Deviationfunctions.

Heresaquickrundownofwhateachfunctiondoes.
STDEV:CalculatesStandardDeviationforasampleusing
BesselsCorrection(N1).
STDEVP:CalculatesStandardDeviationforapopulation.
STDEV.S:CalculatesStandardDeviationforasampleusing
BesselsCorrection(N1).Thisfunctiontechnicallyreplaces
theSTDEVfunction.
STDEV.P:CalculatesStandardDeviationforapopulation.
ThisfunctiontechnicallyreplacestheSTDEVPfunction.
STDEVA:CalculatesStandardDeviationforasampleusing
BesselsCorrection(N1).AllowsfortextandTRUE/FALSE
values.
STDEVPA:CalculatesStandardDeviationforapopulation.
AllowsfortextandTRUE/FALSEvalues.
.
IcantimagineanyscenariowhereIwouldusetheSTDEVPA
andSTDEVAfunctions.Ithinkyoucansafelyignorethose.
.
AsfarasIcantell,thereisnodiscernibledifferencebetween
STDEV.SandSTDEV.Microsoftsaysyoushouldmovetoward
thenewerSTDEV.Sfunction,butyoucantechnicallyusethose
twofunctionsinterchangably.
.
Likewise,Idontseeanydiscernibledifferencebetween
STDEV.PandSTDEVP.AlthoughSTDEV.Pisthenewerfunction,
youcanusethosetwofunctionsinterchangably.
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.
UntilnextweekHappyMathing!

BusinessStatistics,Formulas
ThreeTipsforMakingyourPivotTableFormattingStick
ChandooInterviewsDataPig

28 thoughts on
Understanding Standard
Deviation
1.

Ola
March28,2014at1:14am

MuchbetterthanWikipedia:
http://en.wikipedia.org/wiki/Standard_deviation
Canalsocomparethestddeviationtomean.

2.

RogerGovier
March31,2014at2:41pm

VerynicearticleMike.
IwishthishadbeenaroundwhenIdidStatisticsaspartof
myEconomicsatUniversity.Ididmanagetograsptograsp
thetechniquesbackthenbutthiswouldhavemadelifeso
mucheasier.
Ofcourse,lifewouldhavebeenmucheasierifIhadExcel
http://datapigtechnologies.com/blog/index.php/understandingstandarddeviation2/

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availabletomebackin1963!!!

DorisChoo

3.

April8,2014at7:02pm

Thebestexplanationandsimplifiedversion,Icameacross
sofar.Putmy

DorisChoo

4.

April8,2014at7:11pm

Sorryusing2thumbstypingwithmyIPAD.Clickwrong
button.
Imeantputmyoldstatteachertoshame.Alltheother
Statbooksusedincollegearefullofmumbojumbo,make
thesubjectmorecomplicatingthanitseems,mostallhard
toabsorb.
ThanksMikeyouaretheBest!

5.

PeterBedson
May12,2014at12:34pm

Generally,ifN>about20youcanignoreBessels
Correctioncompletelybecausethesamplemeanandthe
populationmeanareeffectivelythesame.

6.

johnk
May27,2014at7:28pm

Veryniceexplanationsimpleyeteffective.
OnethingIwouldaddtothestandarddeviationsectionis
RelativeStDev,where
RSD(%)=(stdev/mean)*100
Thismakesthestdevmoremeaningfulwithrespecttoyour
mean.Sure,stdev=2isclosetozero,butifyourmeanis
around5(RSD=40%),yourdataismuchmoredisperse
thanifyourmeanisaround40(RSD=5%).

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datapig

7.

July16,2014at8:57pm

John:Greattip!Thanks!

BradJ

8.

July26,2014at10:53pm

Excellentsummary,wishIhadyouatmyschool.
Onethingtoconsideringyourexampleisyouhaveto
understandthecontextofthedata.TheDelimanagersare
differentinhowtheyorderwiththesimilaraverageiswhat
thedatatellsus.Ifyouknowmorecontextaboutthe
operationthedatamaytellyoumore.Maybethesales
targetis32boxesandonemanagerjustorderscloseto
thatwithoutknowingifitwillimpactinventoryandtheother
manageriscompensatingforthefirstbybalancingsales
andinventoryanddoingabettergobofforecastingsales.
Alternativelymaybethesecondmanagerorderswildlyfor
otherreasonandisntthebetterperformer.Without
knowingthecontextofthedataallwecansayistheyorder
significantlydifferentbutnotsureofthereasonsorwhichis
better.
ExcellentSummaryonceagain.

9.

sankar
July28,2014at9:40am

Usefulinsight

10.

NickLeifeld
July30,2014at5:28pm

Veryniceexplanation,IwishExcelhadaSTDEVfunction
forcalculatingCpminwhichtheaveragevariationaround
heTargetiscalculatedandnottheaveragevariation
aroundtheMean

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UnderstandingStandardDeviationBaconBits

Gabby
August5,2014at5:43pm

Thanksfortheexplanation.
IthelpsmealottodifferentiateSTDEVfromMEANand
howtorelateittomyjob.

12.

Alanex
August21,2014at5:12am

Usefulandwelldonearticle.

13.

SivakumarViswanathan
September20,2014at11:02am

Thisisthesimplest&clearestwaytoexplainSD.WishIhad
this2decadesago.ButIcomeacrossSDonadailybasis
asaqualityevaluationtoolforourincomingrawmaterials.I
hopemanyofthetechnicalexpertsinmanufacturingrefer
toSDwithoutactuallygraspingtheunderlyinginference
NowIunderstandexactlywhatIamtalkingabout.Also
wonderhowItoppedStatisticalQualityControlpaperduring
myengineeringdays22yearsback.Thanksforthisarticle

14.

julian
October3,2014at9:47pm

Congratulation!Itisreallyperfectexpalanation!
UnfortunatelyIreadittoolate

15.

roskin
November1,2014at5:04am

wow,nowiunderstandit,willdefinitelysharethe
knowledge.thanks

16.

Ahsan
November7,2014at10:29am

http://datapigtechnologies.com/blog/index.php/understandingstandarddeviation2/

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VeryVeryeasytounderstandS.Dthroughthisexample.

TimMcGuire

17.

December20,2014at3:17pm

Greatsummary,easytounderstandwiththeexample
given.

18.

Anna
January5,2015at11:05am

Millionthanksforthisgreatexplanation,youmademyday!I
amjustwritingmyMastersthesisandwasintrouble
understandingbasicstatistics,nowIamastepfurtherdown
ontheroad!Iwillsharethisarticlewithmyclassmates!
Wishyougoodworkandlookingforwardreadingmore
greatarticles!

19.

YukikoSawada
January6,2015at6:50pm

Thisarticlewasveryinterestingforme.
Ilearnedalotfromthat.Thankyou.

20.

YukikoSawada
January6,2015at6:52pm

Thisarticleisinterestingforme.
Ilearnedalotfromthat,thankyou.

21.

LilianSalan
February9,2015at11:36am

NowIunderstandtheSTANDARDDEVIATION.The
discussion,explanation,andexamplesareveryclearand
simple.Itsgiverealsituationfortheexample.
Thankyousomuch!

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Nandy

22.

March27,2015at11:52am

Bravo,thisisthebriefandclearexplanationihaveseen.
straighttothepoint.iwishyoucouldbemystatteacher.i
giveyoufivestars.

Moha

23.

May18,2015at12:53pm

Thanksforyourclearexplanation

SamuelDavid

24.

July14,2015at1:24pm

Verysimpleandeasyunderstandexampletocomprehend
StandardDeviation.
Thanksalot.
Regards,
SamuelDavid

SamuelDavid

25.

July14,2015at1:25pm

Verysimpleandeasytounderstandexampleto
comprehendStandardDeviation.
Thanksalot.
Regards,
SamuelDavid

26.

Ahmad
August26,2015at10:21am

Theexplanationisveryclearlyandsample,weunderstood
veryeasily.
Thankyousomuch

27.

arash

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February3,2016at9:26pm

amillionthanks.veryclearandsimpleto
understand.ithelpedmealot..

Pradeep

28.

February4,2016at11:03am

Veryclearlyexplained!thanks

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