Being able to calculate standard deviation will help you to understand how risky a stock may be.

Before starting to calculate anything, you need to gather the historic stock prices of a particular stock, over the last 5 years. This information is available on Yahoo Finance, where you can download it as an excel file.

It is best to get monthly stock prices over a period of the last 5 years.

Then, you need to calculate the percentage change between each pairing.

This is done by using the following formula.

For example, if a stock is price at $100 in January 2022 and $120 in February 2022, the calculation would be: ($120 – $100) ÷ $100 = 20%.

You need to do this calculation for each pairing of stock prices, in chronological order.

Once you have done that, you need to find the average return. You do that by adding all percentage changes together and dividing it by the number of percentages.

For example: (5% + 10% + 5% + 3%) ÷ 4 = 5.75%.

In order to calculate standard deviation, the following formula can be used.

It may look complicated but it is not too difficult.

The first step is to subtract the average return from each individual percentage change, then you need to square the sum of that.

Next, after squaring, you need to add all of the percentages together and divide it by the number of percentages.

This number is then square rooted to find the standard deviation.