Coefficient of Variation: Definition, Formula, and How to Use It

The coefficient of variation (CV) is a risk-and-return metric that compares how volatile an investment’s returns are relative to the expected return. Defined as the ratio of standard deviation to expected return, CV can be expressed as a decimal or percentage. In practice, it helps investors compare variability across different datasets or assets, since it’s independent of the measurement units. The article notes that a higher CV generally signals more variability for the return expected, while a lower CV tends to indicate a better risk-return tradeoff. It also explains common formulas, including CV = (s/ x̄) × 100 for samples, and how to calculate CV in Excel.