What is variance in investing?

Variance measures how widely returns are dispersed around their mean (σ²). It underpins volatility, tracking error, and many portfolio risk models.

How do you annualise variance?

Variance scales linearly with time. Multiply per-period variance by the number of periods per year (e.g., 252 for daily, 12 for monthly).

Sample or population variance?

Use sample variance (n−1) for a sample of returns. Use population variance (n) when the dataset represents the entire population.

Variance vs standard deviation — which to use?

Standard deviation is the square root of variance and expressed in the same units as returns. Variance is useful in modelling because it adds linearly across time and components.

What are the limitations of variance?

Variance is sensitive to outliers and treats upside and downside equally. Complement it with downside-focused or tail-risk measures for a fuller view.

OPTIMLY Calculators | Variance Calculator

CALCULATOR FEEDBACK

Investment data

Data type:

Add / remove rows

Calculator options

Data frequency:

Annualisation type:

Return type

Variance estimator