What Is The Importance of Standard Deviation?

Nowadays, you all have watched the news about coronavirus vaccination. And there are so many people who might be thinking about how an agency or medical organization says that this particular vaccine is useful to treat this virus. Well, this is because of the Standard deviation value. Moreover, this is the correct place where the importance of standard deviation is being judged. 

How?

Let me clear this point to you.

During the testing of antiviral medicine, the number of samples of a virus is tested using the particular antiviral vaccine. The experiment is also monitored over a specific time duration. 

The standard deviation comes into the role as it uses to calculate the mean of the virus elimination rate. The value of the SD is helpful to prove that the particular antiviral has a similar effect over the sample populations.

Now, we can see that SD can play an important role in testing the antibiotics. Apart from this, there are several uses of SD. Below, check the importance of standard deviation with a useful example. 

What is the standard deviation?

It uses for measuring the response time that is spread around the Mean. Or in simple words, we can understand it as the smaller the value of SD, the more logical or consistent the response time.

Formula to calculate Standard deviation:

Key point:
You can not effectively link two datasets without using the standard deviation. Let’s understand it with an example. If the average of two data sets is equal, it does not imply that the datasets are also similar. 
Suppose you have a dataset as 200, 199, 201 and others like 200, 0, 400. Both have the same average that is 200. But have different SD that first has SD =1 and second has SD =200.
Therefore, we can say that without SD, it is not easy to check whether the datasets are closer to the mean value or the data is spread over a large range.

Is there any disadvantage of using standard deviation?

Yes, there is!!! But not as much as you might be thinking.

  • Like, it might look hard to calculate for some person.
  • It assumes the pattern of normal distribution.
  • It is unable to provide the full range of data.
  • SD uses only the data statistic, which plot independent variables against the frequency.

Check the importance of Standard Deviation for performance testing.

Before moving to understand the importance of SD in various fields, let’s check how to check performance using SD. The SD tells if the response time of the variables is constant throughout the testing or not.

If the value of the SD is smaller, then the more constant the transaction response time is. This shows that you are delivering an excellent experience to your end-users. 

Let’s check an example of it to get a clear picture of it.

In this example:

  • The mean of the transaction variables is similar. Therefore, you are unable to test the result on the basis of the mean. That is why average is useless in this case.
  • The 90% of “search” is much better as compared to others. Therefore, it considers being an important metric to calculate response time.
  • It is quite clear that the “logout” transaction has the lowest SD. This implies that the response time is more constant than the others.

Finally, we get the best performer that is logout, but here we require to check the two requests for another request for the tuning purpose.

How to calculate the standard deviation?

There are various tools by which you can easily check the SD of the variables. But if you want to get familiar with the magic of SD calculation, then follow the below steps.

Calculate the average of the sample numbers.
Subtract average from every number and take the square of the value.
Sum all the values and divide them with (N-1).
Calculate the square root of all. Finally, you got the standard deviation.

Now, check the search transaction response time.

Average = (2 + 3 + 1 + 15 + 4)/5 = 5.
(2-5)^2 = (-3)^2 = 9;(3-5)^2 = (-2)^2 = 4;(1-5)2 = (-4)^2 =16;(15-5)^2 = (10)^2 =100;(4-5)2 = (-1)^2 = 1;
(9 + 4 + 16 + 100 + 1)/4 = 32.5
√32.5 => 5.7

Additional point: What is the importance of standard deviation in various fields?

In Finance

The standard deviation is used in finance by business owners to understand risk management and make better business decisions. It helps in calculating the margins of error that occur in the survey reports taken by an organization or company.

Let’s take an example of it.

Suppose you have a logistics and transportation business. You can now use standard deviation to know how many drivers you need to run the business.
Moreover, the SD is also useful to calculate risk-adjusted returns using the Sharpe ratio. This helps in getting the reasons to get the maximum results by considering the minimum risk.

Quality Control

Quality control in manufacturing and production is important to keep the standards. It is used to test the output sample against the particular standard. 

If the SD is greater than expected, then the samples are rejected because they do not match with the standard sets. There are several soft drink companies that use it to check the sugar content in the product using standard deviation. 

Let’s understand it through an example:

Suppose a coke can have a mean of 250ml and ±2ml is SD; it means the minimum coke capacity is 252ml and 248ml. It means lesser and greater than this value is distributed by the company.

Polling

Polls use to know who is going to win the election. The standard deviation can help in calculating the margin of error. Those are useful in calculating the poll result.

Example:

Suppose you ask different groups (100 people groups) about who they will vote for. Here you can use the samples’ answers for calculating the margin of error and the difference. Moreover, it tells you the reliability of the polls.

In Business

It is known to all that a company and employee always have some conflict among them. These conflicts relate to salary packages and are unfair to some employees. 

The employee can check the difference in their salary with the average salary and standard deviation of the other company employees. If the SD is higher than expected, then the owner must look into the matter.

Let’s understand it with an example:

If you go through the accounts and you realize that your senior’s salary data has a higher SD, then it is time to check the reason. 
Once you check the reason, you found that your senior gets the higher salary because of the experience of 10 years. Then it is fair that the company pays the higher salary to the senior.

In daily life:

Most people do not have any idea that they use Standard deviation in their daily life. There are numerous examples that show that we use SD concepts even without knowing.

Some of the examples are:

Weather forecasters use SD to predict the weather of the cities, country, or even the world.
Teachers use the concept of average and SD to calculate the result of the test.
In budgeting, everyone uses the SD to check how much money they should spend. Or they might be spending much more money than expected.

Conclusion

Quality testing and factors are some of the important things that a company needs to take care of. This can be calculated using the standard deviation. Above, I have mentioned all the importance of standard deviation in various fields. 

Once you understand where the SD concept is applicable, you can easily use it. If you are unable to understand anything about SD, then comment in the below section. I will always help you solve your query related to statistics concepts in the easiest way. 

“Keep on learning and practicing the concepts of statistics with our quality blog.”

Frequently Asked Questions

What is the use of standard deviation in real life?

You can easily use standard deviation to match two or more sets of data. For instance, a weather forecasting reporter analyzes the high temperature that uses to forecast the two different weather patterns of cities. The lower SD value would define a reliable weather prediction.

What are the uses of standard deviation in statistics?

SD is used for measuring the range of data distribution. Moreover, it calculates the distance between every data point and the average. The formula for SD depends on whether the collected data is estimated as a sample population of its own or the sample expressing the value of a larger population.

What are the special advantages of standard deviation?

The advantage of SD are:

It provides a more realistic view of how the data is shared.
Determines how much data is gathered throughout an average value.
SD does not affect extreme values.

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