Question

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What kind of risk does the standard deviation of an individual asset measure?

Answer 1

Standard deviation actually tells about the volatitlity of the asset price. It means the fluctuation of the assets price from its average. So here we can see the spread of the asset. Fluctuation may be to upwards or downwards . So if the asset is highly volatile we can it by using the standard deviation measure. High standard deviation shows that the price fluctuation is high so it indicate high risk. In case of low standard deviation it means price is constant and no big fluctuation is happening. So it indicates there is less risk. This volatility risk is identified through standard deviation.

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