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Standard Deviation

We use the Standard Deviation of a portfolio's rate of return as a proxy for the portfolio's variability (risk).

To calculate the Standard Deviation, we use a sample of 60 monthly observations. The Standard Deviation is calculated as follows:

where:  
 is the standard deviation;
 is a monthly observation of the portfolio's rate of return;
 is the average of all monthly rates of return in the sample.

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