**VALUATON. Which bank? Part 3. And how to choose your bank for trading and investment
**

Suppose that you, as a risk-averse investor (or trader), wanted a simple rule for choosing the optimum investment decision when it comes to a bank.

Surely you want your money to be outlaid where it will deliver the highest expected return for a given level of risk.

How do you find out what the risk is?

At Bond Uni where I am still study at the age of 63 for my 4^{th} degree, there is a statistical dimension we use to determine the risk associated with a stock. We call it variance.

Variance measures how far a set of closing prices are spread out over a period of time. A small variance indicates that the stock price may not have moved a lot during that period and it tended to close near the average price. The volatility of the stock is then very small. A large variance indicates higher volatility and therefore higher risk.

Standard deviation is simply the square root of the variance. One standard deviation encompasses about 65% of all the closing prices within a particular period and two standard deviations include about 95% of the all the closing prices. The lower the standard deviation is, the lower the risk.

*The formula for measuring an unbiased estimate of the population variance from a fixed sample of n observations is the following: (s^{2}) = Σ [(x_{i} – x̅)^{2}]/n-1 *

*Here’s what the parts of the formula for calculating variance mean: s ^{2} = Variance Σ = Summation, which means the sum of every term in the equation after the summation sign. x_{i} = Sample observation. This represents every term in the set .x̅ = The mean. This represents the average of all the numbers in the set .n = The sample size. You can think of this as the number of terms in the set*

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