Risk is the volatility of an investment as measured by standard deviation.

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One of those factors is volatility (often measured by standard deviation).

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As you can see in the graph below, when combining such assets, returns generally shift to the lower right: higher return and lower risk (as measured by standard deviation).

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Investments with a high standard deviation over one year have a lower standard deviation when measured over longer periods.

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The vertical axis (Y axis) is the compounded portfolio return and the horizontal axis (X axis) is portfolio risk as measured by the annual standard deviation of return.

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For example, I just calculated the standard deviation of the temperatures measured at one instant by 14 weather stations located in my county.

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The Calculation: To quantify the data, I measured each of those four statistics (YTD return, number of up days, standard deviation, and maximum drawdown) against all other stocks and gave them a score from zero to 100.

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