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Coefficient of Variation

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Definition

Coefficient of variation is defined as the ratio of the standard deviation to the mean and gives a measure of dispersion of the distribution. It is sometimes expressed as a percentage by multiplying the above number by 100.

Since both the mean and standard deviation have the same Units, these Units cancel out in the ratio, making the coefficient of variation a dimensionless index. The advantage of this index is that it can be used to compare the dispersion of multiple datasets even if the Units of measurement differ and the Means vary a lot from each other. It is used for positive valued (X > 0) distributions.

Application

The CV takes values from 0 and above. It is 1 when the standard deviation equals the mean. CV < 1 indicates smaller variance and CV > 1 indicates a higher variance in the distribution.