What Is Statistical Variance?
Variance measures the dispersion and spread of data points around their arithmetic mean. A low variance indicates that values are clustered tightly near the mean, while a high variance indicates extensive scatter.
1. Sample Variance (Unbiased Bessel's Correction)
s²=
∑ (xᵢ − x̄)²n − 1
2. Population Variance (Complete Universe)
σ²=
∑ (xᵢ − μ)²N
Step-by-Step Calculation Breakdown (Example: [4, 6, 8])
Step 1: Compute Arithmetic Mean (x̄)
• Sum = 4 + 6 + 8 = 18
• Mean x̄ = 18 ÷ 3 = 6.000
Step 2: Calculate Deviations and Sum of Squared Deviations (SS)
• (4 − 6)² = (−2)² = 4
• (6 − 6)² = (0)² = 0
• (8 − 6)² = (+2)² = 4
• Sum of Squared Deviations (SS) = 4 + 0 + 4 = 8.000
Step 3: Divide by Degrees of Freedom
• Sample Variance s² = 8 ÷ (3 − 1) = 8 ÷ 2 = 4.000
• Population Variance σ² = 8 ÷ 3 = 2.667
• Sample Standard Deviation s = √4 = 2.000
Population vs. Sample Variance
When calculating variance, selecting the proper denominator is essential:
- Sample Variance (n − 1): Used when analyzing a representative sample from a larger universe. Dividing by n − 1 compensates for underestimating variability.
- Population Variance (N): Used only when every single entity in the targeted universe has been recorded without sampling.