Question

If an investor does not diversify his portfolio and instead puts all of his money in one stock, the appropriate measure of security risk for that investor is the __________.

Answer 1

If an investor does not diversify his portfolio and instead puts all of his money in one stock, the appropriate measure of security risk for that investor is the "stock's standard deviation."

What is standard deviation?

The standard deviation would be a statistic that calculates as square root of a variance and indicates the dispersion of the a dataset compared to its mean.

Its standard deviation is determined as the square root of the variance by determining the deviation of each data point from the mean.

Some key features regarding the  standard deviation, are-

• The standard deviation of a dataset reflects its dispersion compared to its mean.
• A square root of a variance is used to compute it.
• In finance, standard deviation is frequently employed as a measurement of an asset's relative riskiness.
• The volatile stock has a large standard deviation, whereas a description stock has a low deviation.
• The standard deviation, on the other hand, assesses all ambiguity as risk, especially when it is in the investor's advantage, such as above-average profits.

To know more about  standard deviation, here

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