If you are trying to determine whether to purchase Security A or Security B as the only holding in your portfolio, then you can consider the coefficient of variation in order to understand the risk-return relationship of the individual securities.

Question

Quizplus · Accepted Answer

The coefficient of variation is a useful tool for assessing the risk-adjusted returns of individual securities. By dividing the standard deviation of returns by the average return, it provides a measure of the relative riskiness of different investment options. In this case, comparing the coefficient of variation of Security A and Security B may help an investor make a more informed decision about which security to include in their portfolio.

If You Are Trying to Determine Whether to Purchase Security