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Understanding Standard
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datapig March26,2014 BusinessStatistics,Excel
Formulas 28Comments
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StandardDeviationisoneofthosestatisticaltermsthrown
aroundthecorporateworldwithvagueabandon.Manybusiness
analystsdonttrulyunderstandtheconceptofStandard
Deviation.Ifyoureoneofthosefolks,youcanstoplivingthelie.
IntodaysPulitzerworthypost,youlllearnhowthis
underestimatedstatisticalmeasurecanhelpyoubetter
understandthedatayoureworkingwith.
.
WhatStandardDeviationMeasures
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Imagineyousupervisetwodelimanagerswhosellbacon.Since
QueryforDummies
youdontwantanybacontobewasted,itsimportantthatthese
EditingShapePointsto
twomanagersholdasteadyinventory.Inanefforttomeasure
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howwelltheymanageinventory,youdecidetoanalyzethe
EnteringMorethan31
boxesofbaconeachmanagerorderedinthelastsixweeks.
CharactersinaWorksheet
Takingtheaverageofthelast6weeksshowsthateach
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managerordersanaverageofaround32boxesofbaconper
UnderstandingtheMOD
week.Onthesurface,theaveragesmakeitlookliketheyare
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performingequally.
UsePowerQuerytoGeta
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Butifyoulookcloser,youllseethatoneofthemanagershas
weeklyordersof22,34,58,52,10and21boxes.Forthis
manager,theaveragemaybemathematicallycorrect,butit
hidesthevolatilityofhisweeklyorders.Inotherwords,
sometimestheaverageofadatasetdoesntdoagoodjob
representingthedata.ThisiswhereStandardDeviationcomes
in.
BeExcellence
ChandooExcelTips
ChrisWebBIBlog
ClearlyandSimply
Contextures
DailyDoseofExcel
ExcelCampus
ExcelTV
.
StandardDeviationgivesyouasenseofhowdispersed(spread
out)thedatainyoursampleisfromtheMean(Average).Said
anotherwayitletsyouknowifyoucanrelyontheMeanto
giveyouameaningfulrepresentationofthedata.
ExcelGuru
PowerPivotPro
PTSBlog
SpreadsheetGuru
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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(23)
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AskDataPigaQuestion(1)
BusinessStatistics(11)
Excel&AccessIntegration
(16)
HowStandardDeviationisCalculated
Excel2010(18)
Excel2013(18)
ExcelAddIns(15)
OK,weknowwhatStandardDeviationshows.Letsnowtakea
ExcelCharts(26)
lookathowitsactuallycalculated.
ExcelFormattingTips(39)
ExcelFormulas(47)
Wellstartwiththissetofnumbers(inblack).Asyoucansee,
ExcelNumberFormatting
IvealreadyusedtheSTDEVfunctiontocalculatetheStandard
(14)
Deviationof21.6(inorange).
ExcelTipsandTricks(103)
ExcelVBA(81)
Interviews(11)
MSQuery(4)
OldiesbutGoodies(5)
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PivotTables(35)
SaturdayBaconRecipe
HerearethestepsExceltooktocalculate21.6astheStandard
Deviation.
(41)
SpreadsheetAuditing(11)
Notethesestepsarepurposefullyvisualtobetterrelaywhats
Training(22)
goingon.Inreality,allthisstuffhappensinstantlybehindthe
Visualizations(69)
scenes.
WorksheetProtection(8)
Xcelsius(1)
~BaconBits(151)
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
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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
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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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11.
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
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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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