Trading Terms

Residual Value

The unexplained portion of the monthly return refers to the random fluctuation in returns that cannot be attributed to any specific factors. The standard deviation, a measure of variability, is used to quantify this randomness. It represents the average difference between each return and the mean return, providing insight into the level of risk associated with an investment. Therefore, a higher standard deviation indicates a higher level of risk, while a lower standard deviation implies a lower level of risk.

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