How to Calculate Variance on Excel

If you find yourself working with large datasets, then Excel’s ability to calculate statistical measures may come in very handy. One of these measures is the variance, which is a measure of how much the data values deviate from the average. Excel provides users with several ways to calculate the variance, depending on the level of control and accuracy required. In this post, we’ll walk you through the steps of calculating variance in Excel, with clear and straightforward explanations that will help you get accurate results quickly and efficiently without much effort.

What is variance?

Variance is a statistical measure that tells you how much the individual data values deviate from the average of the data set. In other words, it gives you an idea of how spread out the data is. A high variance value means that the data is more spread out, while a low variance tells you that the data is densely packed around the mean.

How to calculate variance in Excel: the easy way

If you’re looking for a quick and easy way to calculate variance in Excel, then you can use the built-in VAR function. Here are the steps:

Step 1: Select the cells

Select the cell range that you want to calculate the variance for. If you just want to calculate the variance for a single column, select the column of data.

Step 2: Enter the formula

Next, enter the following formula into any empty cell:

=VAR(range)

Replace “range” with the cell range you selected in step one. For example, if you selected cells A1 to A10, the formula would look like =VAR(A1:A10).

Step 3: Press enter

Once you have entered the formula, press the enter key. The result, which is the variance value for the selected data range, will appear in the cell.

How to calculate variance in Excel: using advanced options

If you need to calculate variance using additional options, then you can use the VAR.S or VAR.P functions instead of VAR.

VAR.S function

The VAR.S function is used to calculate variance for a sample of data. Here are the steps to use this function:

Step 1: Select the cells

Select the cell range that you want to calculate the variance for. If you just want to calculate the variance for a single column, select the column of data.

Step 2: Enter the formula

Next, enter the following formula into any empty cell:

=VAR.S(range)

Replace “range” with the cell range you selected in step one. For example, if you selected cells A1 to A10, the formula would look like =VAR.S(A1:A10).

Step 3: Press enter

Once you have entered the formula, press the enter key. The result, which is the sample variance value for the selected data range, will appear in the cell.

VAR.P function

The VAR.P function is used to calculate variance for the entire population. Here are the steps to use this function:

Step 1: Select the cells

Select the cell range that you want to calculate the variance for. If you just want to calculate the variance for a single column, select the column of data.

Step 2: Enter the formula

Next, enter the following formula into any empty cell:

=VAR.P(range)

Replace “range” with the cell range you selected in step one. For example, if you selected cells A1 to A10, the formula would look like =VAR.P(A1:A10).

Step 3: Press enter

Once you have entered the formula, press the enter key. The result, which is the population variance value for the selected data range, will appear in the cell.

Using the Data Analysis Tool

Excel also provides users with a built-in statistical tool called “Data Analysis.” If you have a newer version of Excel, you will need to activate the Data Analysis add-in first. Here’s how to use the Data Analysis tool to calculate variance:

Step 1: Activate the Data Analysis add-in

If you have an older version of Excel, you can easily enable the Data Analysis tool by clicking on the “Tools” tab, then “Add-ins”. Scroll down the list of add-ins until you find “Analysis ToolPak.” Select it and click “OK.”

Step 2: Select the Data Analysis tool

Once you’ve enabled the add-in, click on the “Data” tab, then click the “Data Analysis” button in the Analysis group.

Step 3: Select “Variance” as the analysis tool

When the Data Analysis dialog box appears, scroll down the list of analysis tools and select “Variance.” Click “OK.”

Step 4: Enter the input range

In the “Variance” dialog box that appears, enter your input range in the “Input Range” field. If you have column or row headers, make sure the “Labels” option is selected. Then, select the cell where you want the output range to appear.

Step 5: Click “OK”

Finally, click “OK.” The resulting variance value will appear in your selected output range.

Interpreting Variance

It’s important to understand the significance of variance values. As a rule of thumb, a variance value that is close to zero indicates that the data points are closely clustered around the mean. A large variance means that the data is widely dispersed around the average.

However, it’s also important to keep in mind that variance doesn’t tell you anything about the direction of the deviations – whether the data values are above or below the average.

The Bottom Line

If you’re working with data in Excel, the variance function is a useful tool to have in your arsenal. Whether you use the basic formula, the VAR.S or VAR.P functions, or the Data Analysis tool, calculating variance in Excel is quick, easy, and accurate once you get the hang of it. With these straightforward steps, you can start taking control of your data and make more informed decisions that take into account the variation within your dataset.

Frequently Asked Questions

Here are some common questions people have when they start using Excel to calculate variance.

Can variance be negative?

No, the variance value cannot be negative. Variance always measures the average deviation of data values from the mean, so it is always a positive value or zero.

Can the variance of a sample be higher than the variance of a population?

Yes, it’s possible for the variance of a sample to be higher than the variance of the population. This happens when the sample is not a true reflection of the population. However, as the sample size increases, the sample variance will tend to become closer to the population variance.

What is the difference between the VAR.S and VAR.P functions?

The main difference between these two functions is that VAR.S is used to calculate the variance for a sample of data, while VAR.P calculates the variance for an entire population.

When should I use the Data Analysis tool instead of the VAR function?

The Data Analysis tool has more advanced options and can be used for more complex analysis. For simple calculations, using the VAR function is faster and easier.

How do I interpret variance values?

A small variance value indicates that the data is closely clustered around the mean, while a large variance value means that data points are more widely dispersed. However, variance doesn’t tell you anything about the direction of deviation – whether the data values are above or below the average.