- Expected return
- 6.2 %
- Model variance
- 33.96 percentage points²
- Model standard deviation
- 5.8275 %
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Pair each return with its scenario probability
Enter percentage numbers in matching order. The demonstration probabilities 30, 50 and 20 belong to returns −2, 8 and 14 respectively. A probability of 30 means 30%, and a return of −2 means −2%. The inputs describe a fictional probability model, not observed investment performance.
Use the model’s own expected return
The calculator multiplies each return by its probability and adds the contributions. For the demonstration, the expected return is −0.6% + 4% + 2.8% = 6.2%. It then uses that 6.2% mean in every squared deviation.
Read the variance units
The model variance is the probability-weighted sum of squared deviations. The default result is 33.96 in squared percentage-point units, equivalent to 0.003396 when returns are represented as decimal fractions. Its square root is approximately 5.8275% standard deviation.
Distinguish a probability model from a historical sample
These weights already specify the finite distribution. The calculator therefore does not divide by the number of scenarios or by one less than that number. A historical sample-variance estimate is a different statistic. The result describes the assumptions entered and does not establish that the scenarios are reliable forecasts.