All language subtitles for 03 - Analyze data using variance and standard deviation

- [Instructor] In this movie,

I will show you how to calculate two important measures:

variance and standard deviation.

Variance is one measure of error

that is the distance of values from the mean.

Standard deviation is the square root of the variance,

and as we'll see elsewhere in this course,

it's extremely useful.

My sample file is 01_03_Variance

and you can find it in the Chapter01 folder

of the Exercise Files collection.

In this workbook, I have a dataset

in cells A4 through A13.

And in it, I have values that reflect orders

for a company.

I've already calculated the mean or average in cell C1.

To start, I need to calculate the error

or distance from the mean of each of my order values.

So I'll click in cell B4

and I'll type equal.

And I want to start with the value in A4,

which is the order,

and I will subtract the value in C1,

which is the average.

So if the order is lower than the average,

then we'll get a negative value.

I do want the cell reference to A4 to change

but I don't want C1 to change

'cause we'll always be looking at the same average.

So I'll press F4 to get an absolute reference.

Press Enter, and I get 3,090.

And we're rounding to whole numbers here.

Now I can copy that formula to the rest of the range.

So I'll click cell B4

and double click the fill handle

at the bottom right corner of the cell

and you can see that the formula has been copied down.

Now to calculate the variance accurately,

I need to square the error.

So in cell C4, I'll type equal

and that will just be the value in B4 squared.

So I'll type a caret,

indicating I want an exponent

and then the number two.

Press Enter, and I get that value there.

I'll click cell C4, double click the fill handle again.

And copy it down.

One very common question

is why you need to square the error

to calculate variance.

Well, let's see what happens if you don't.

I'll go to cell B14

and then I will add up all of the errors.

So I'll press Alt + equal

to create an AutoSum formula.

And then press Tab

and you can see that the error is zero.

And that's because when you take an average,

the sum of all the differences must be zero.

That happens by rule.

So I will replace the formula in cell C14

and go ahead and click that cell

if you happen to click away.

Press Alt + equal to get my AutoSum

for the values from C4 to C13,

Enter and there is that sum.

Now I can calculate the variance.

So I'll go to cell C16

and I'll type an equal sign

and that will be C14, which again is the sum

of my squared errors.

And then a forward slash for division,

left parentheses and it'll be a count

for the number of values in C4 through C13 minus one.

Then type a right parentheses and Enter.

And I get that square root of 7,100,000

and a little bit more.

Now if I want to calculate the standard deviation,

I can go to cell C18

and take the square root

of the value in C16.

So I'll type equal and square root, SQRT,

and that's the value in C16.

Right parentheses and Tab

so I don't scroll down in the workbook

and I get a standard deviation of 2,666.

Great, that value makes a lot of sense

for a dataset that has a mean

of 5,482.6 and a maximum value of about 9,500.

There are quicker ways to calculate the variance

and standard deviation.

So I'll go ahead and show those to you now.

I'll click in cell F16, type an equal sign

and I will use the VAR.S function.

So I'll type VAR.S

and we're assuming that we have a sample

and not all of the data in a population.

This is where the -1 comes in.

We are assuming that we don't have all of our data

so that we're dividing by a sightly smaller number

than we would otherwise,

so we have a more conservative estimate.

So I'll type a left parentheses

and we are taking the variance

of the sample in cells A4 to A13.

Right parentheses and Enter.

And as you can see, we get 7,106,604.

And if I go down to cell F18,

and type equal STDEV.S,

again for the sample,

and A4 through A13,

right parentheses and Tab,

then we get a standard deviation of 2,666.

I wanted show you the mechanics

of how variance and standard deviation are calculated

so you have an idea of what going on

when Excel makes those calculations for you.

With variance and standard deviation in mind,

you will get a lot out of the rest of the course.