How to Calculate Variance in Excel

Variance is a crucial statistical measure that provides insight into how spread out a set of data points is from their mean or average value. Simply put, it quantifies the extent to which individual data points deviate from the average. To illustrate, consider tracking the weekly earnings of a grocery shop. You’d want to know how much the daily earnings differ from the average weekly earnings, and variance is the tool that sheds light on this volatility.

Example Data: Weekly Earnings of a Coffee Shop

Week Earnings ($)
1 500
2 550
3 600
4 480
5 520

Calculating Variance using Excel’s Built-in Function

Step 1: Enter the Data

Begin by inputting the data set into an Excel spreadsheet.

Step 2: Use Excel’s Variance Function

In Excel, there are two functions to compute variance: VAR.P for population variance and VAR.S for sample variance. As we’re working with sample data, we’ll use VAR.S.

In an empty cell, type the following formula:

=VAR.S(B2:B6)

Here, B2:B6 represents the range of cells containing your data.

Press Enter, and Excel will calculate the sample variance.

For our example data set:

=VAR.S(500, 550, 600, 480, 520)

The calculated sample variance using Excel’s function is approximately 2200.

Interpreting the Result

In our grocery shop example, the calculated variance is approximately 2200. This value signifies the average squared deviation of weekly earnings from their mean. A higher variance implies greater variability in earnings from week to week.

Conclusion

Mastering the skill of calculating variance in Excel is essential for understanding the distribution and volatility of data. With straightforward formulas and built-in functions, you can swiftly perform these calculations, empowering you to make informed decisions based on data variability. Whether you’re analyzing business earnings or conducting scientific experiments, proficiency in variance calculation in Excel equips you with the insights needed to navigate the world of data with confidence.

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