Variance surrounds us. Despite our desire to have the same thing every day, we will face a slight variation of something we want to encounter again.
A mathematical definition of the variance is quite straight forward:
it is a measure of how far are the data values are located from the mean.
The population variance is defined as : , where is the population size (the number of values in the set), is a selected value, is the population mean (the average).
If we take Coca-Cola’s share price as an example and calculate the variance for all available data, we get .
The minimum, mean and maximum in the same data are .
The square root of the variance will give us a more firm view on the deviation from the mean and the spread of the data values: .