Annualized Standard Deviation

From Open Risk Manual

Definition

Annualized Standard Deviation. Standard Deviation for some measure over a specific reference period

Standard deviation applied to the annual rate of return of an investment provides insights on the historical volatility of that investment. The greater the standard deviation of the price of a security, the greater the volatility. Multiplying monthly standard deviation by the square root of twelve (12) is an industry standard method of approximating annualized standard deviations of monthly returns.

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