coefficient of variance's significance
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2
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As per I know, coefficient of variance(CV) is used for
measuring consistency of any variable. But should one always depend on CV for taking decisions, especially when means are different ?
For instance, there are 2 companies: A and B. Company A has a mean profit of $1000 and CV is 0.816%.
Company B has a mean profit of $7666.67, but CV is 26.8%.
In which company should one invest?
variance
edited 2 hours ago
Peter Flom♦
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asked 3 hours ago
nafis
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up vote
2
down vote
favorite
As per I know, coefficient of variance(CV) is used for
measuring consistency of any variable. But should one always depend on CV for taking decisions, especially when means are different ?
For instance, there are 2 companies: A and B. Company A has a mean profit of $1000 and CV is 0.816%.
Company B has a mean profit of $7666.67, but CV is 26.8%.
In which company should one invest?
variance
edited 2 hours ago
Peter Flom♦
73.9k11105201
asked 3 hours ago
nafis
111
New contributor
nafis is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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add a comment |
up vote
2
down vote
favorite
up vote
2
down vote
favorite
As per I know, coefficient of variance(CV) is used for
measuring consistency of any variable. But should one always depend on CV for taking decisions, especially when means are different ?
For instance, there are 2 companies: A and B. Company A has a mean profit of $1000 and CV is 0.816%.
Company B has a mean profit of $7666.67, but CV is 26.8%.
In which company should one invest?
variance
edited 2 hours ago
Peter Flom♦
73.9k11105201
asked 3 hours ago
nafis
111
New contributor
nafis is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
As per I know, coefficient of variance(CV) is used for
measuring consistency of any variable. But should one always depend on CV for taking decisions, especially when means are different ?
For instance, there are 2 companies: A and B. Company A has a mean profit of $1000 and CV is 0.816%.
Company B has a mean profit of $7666.67, but CV is 26.8%.
In which company should one invest?
variance
variance
edited 2 hours ago
Peter Flom♦
73.9k11105201
asked 3 hours ago
nafis
111
New contributor
nafis is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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edited 2 hours ago
Peter Flom♦
73.9k11105201
asked 3 hours ago
nafis
111
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edited 2 hours ago
Peter Flom♦
73.9k11105201
edited 2 hours ago
Peter Flom♦
73.9k11105201
edited 2 hours ago
Peter Flom♦
73.9k11105201
73.9k11105201
asked 3 hours ago
nafis
111
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nafis is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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asked 3 hours ago
nafis
111
asked 3 hours ago
nafis
111
111
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New contributor
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CV is a measure of the spread of a distribution, adjusted for the mean of the variable - it is defined as the standard deviation divided by the mean. So, it is only useful in situations where the means are different - if the means were the same, you could just use the standard deviation.
However, CV becomes useless in some situations - e.g. when some of the values are negative.
As to your specific question, this is far too little information to decide which company to invest in. And, since profit can be negative, the CV may be nonsensical. Suppose, for example, that company C has profit over the last three years of $1,000, $0 and -$1,000 (a loss of $1,000). Then the CV is undefined because the mean is 0. But change the first profit to $1,001 and the CV is now 3001.5 (or 300,150%). Or make the the loss in year 3 one dollar more and the CV is negative.
answered 2 hours ago
Peter Flom♦
73.9k11105201
add a comment |
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1 Answer
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active
oldest
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1 Answer
1
active
oldest
votes
active
oldest
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active
oldest
votes
up vote
2
down vote
CV is a measure of the spread of a distribution, adjusted for the mean of the variable - it is defined as the standard deviation divided by the mean. So, it is only useful in situations where the means are different - if the means were the same, you could just use the standard deviation.
However, CV becomes useless in some situations - e.g. when some of the values are negative.
As to your specific question, this is far too little information to decide which company to invest in. And, since profit can be negative, the CV may be nonsensical. Suppose, for example, that company C has profit over the last three years of $1,000, $0 and -$1,000 (a loss of $1,000). Then the CV is undefined because the mean is 0. But change the first profit to $1,001 and the CV is now 3001.5 (or 300,150%). Or make the the loss in year 3 one dollar more and the CV is negative.
answered 2 hours ago
Peter Flom♦
73.9k11105201
add a comment |
up vote
2
down vote
CV is a measure of the spread of a distribution, adjusted for the mean of the variable - it is defined as the standard deviation divided by the mean. So, it is only useful in situations where the means are different - if the means were the same, you could just use the standard deviation.
However, CV becomes useless in some situations - e.g. when some of the values are negative.
As to your specific question, this is far too little information to decide which company to invest in. And, since profit can be negative, the CV may be nonsensical. Suppose, for example, that company C has profit over the last three years of $1,000, $0 and -$1,000 (a loss of $1,000). Then the CV is undefined because the mean is 0. But change the first profit to $1,001 and the CV is now 3001.5 (or 300,150%). Or make the the loss in year 3 one dollar more and the CV is negative.
answered 2 hours ago
Peter Flom♦
73.9k11105201
add a comment |
up vote
2
down vote
up vote
2
down vote
CV is a measure of the spread of a distribution, adjusted for the mean of the variable - it is defined as the standard deviation divided by the mean. So, it is only useful in situations where the means are different - if the means were the same, you could just use the standard deviation.
However, CV becomes useless in some situations - e.g. when some of the values are negative.
As to your specific question, this is far too little information to decide which company to invest in. And, since profit can be negative, the CV may be nonsensical. Suppose, for example, that company C has profit over the last three years of $1,000, $0 and -$1,000 (a loss of $1,000). Then the CV is undefined because the mean is 0. But change the first profit to $1,001 and the CV is now 3001.5 (or 300,150%). Or make the the loss in year 3 one dollar more and the CV is negative.
answered 2 hours ago
Peter Flom♦
73.9k11105201
CV is a measure of the spread of a distribution, adjusted for the mean of the variable - it is defined as the standard deviation divided by the mean. So, it is only useful in situations where the means are different - if the means were the same, you could just use the standard deviation.
However, CV becomes useless in some situations - e.g. when some of the values are negative.
As to your specific question, this is far too little information to decide which company to invest in. And, since profit can be negative, the CV may be nonsensical. Suppose, for example, that company C has profit over the last three years of $1,000, $0 and -$1,000 (a loss of $1,000). Then the CV is undefined because the mean is 0. But change the first profit to $1,001 and the CV is now 3001.5 (or 300,150%). Or make the the loss in year 3 one dollar more and the CV is negative.
answered 2 hours ago
Peter Flom♦
73.9k11105201
answered 2 hours ago
Peter Flom♦
73.9k11105201
answered 2 hours ago
Peter Flom♦
73.9k11105201
answered 2 hours ago
Peter Flom♦
73.9k11105201
73.9k11105201
add a comment |
add a comment |
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