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Variance. Standard deviation. CURVE.

Variance. Standard deviation. CURVE.
Maybe it's about the deviation we make from our goals. Something unplanned. What we can understand is that no path in life is straight. There are curves across the road.

In investments, this curve offers you the opportunity to outline a new strategy and redo your management.
by Josué Ramos   |   comments 0
Thursday, June 18 2020

Sometimes when you are somewhere you feel like you are not supposed to be. You feel that it was not supposed to be happening. There is something very wrong with all of this. There is a spiritual thing, a sensitivity, something that a skeptic like me should not discuss with you.

Sometimes you are surrounded by people who don't add nothing to you, doing things that in the near future will mean nothing. You may feel incomplete. Maybe it crosses your mind that you weren't supposed to be living that. Not that very moment, not with those people. Just like being alone in a crowd. Loneliness is not a state: it is a feeling. You feel its presence. Feel its taste, its smell. Loneliness leaves marks. Scars. A trail.

You can be alone and not feel alone. And you can be surrounded by people - friends, family - and still feel isolated from the world. A connection is missing. Everything is wrong inside you. Something's broken. There is a detour in your path. You don't know how you have that knowledge, but you just know. Deep down you have the hope of finding that link in someone or something. To find the way again. To be able to connect. We've been looking for that connection all our lives. I can say that I spent my whole life feeling alone. Today no more.

Because I know all of this so well, I feel every word described deep inside my chest. I know we all need that diversion. It is a way of life to teach us something. At least, I think so. If it weren't for the period living on that curve, I wouldn't have know the value of being on the "right" path again. And why do we call it the right path? You just feel. It feels that you are experiencing something good. Something that completes it. Something you don't want to miss. Something that is not empty. Not that there are right and wrong things in the situations you choose to live in your life. But while we are on the diversion, we are missing something. And we feel it. Deep down we know. Sometimes, we just don't want to face it.

We may be wasting time, which is very precious when it comes to life. We can lose money, something serious when it comes to betting or any investment. You may not have understood the depth of this, but I will try to put it in the best possible way for you.

Imagine a blank sheet of paper. Mentally draw the letter "A" somewhere on this sheet. Then give a space more than 15 centimeters apart and draw the letter "B" anywhere else on this sheet, wherever you want.

Now notice that there are two points in front of you. Point "A" and point "B". Mentally, again, take a ruler and align these two points and draw a straight line.

The result of this will be the shortest distance between these two points, that is, the straight line. Is that correct? Yes, according to Euclidean geometry. But what if we put some obstacles right in the middle of those two points? We would would forced any "being" who ventures down this path, to make a detour. Now, mentally fold this sheet in half. In both examples, the straight line is no longer the shortest distance or the fastest between these two points.

Maybe it's about the deviation we make from our goals. Something unplanned. Something that life conspires to make happen. And that for some reason it had to happen. What we can understand is that no path in life is straight. There are curves across the road. And we need to follow this path to get where we want to go.

Many see this deviation as variance. Poker players often use this term all the time, sometimes in a very wrong way. For mathematics, this curve is called standard deviation. The standard deviation is the most widely used measure of statistical dispersion. It shows how much each element of a distribution has deviated or varied in relation to a central value, average or better, in relation to the expected value.

What is this for?

Knowing how much we are deviating from the profit path in an investment is important to maintain good management and devise new strategies. Because with the numbers seen and reviewed, we can have a basis of how we will do in the next season.

There is a huge discussion about the cycle of these facts, but this discussion involves more amateurs than professionals in the field. As a theoretician and professional in the field, I have my opinion and my own theory. But we are not going to raise this discussion as a whole now.

Discussion that would talk about the projection of the numbers of a season. Discussion that would end the moment the investor remembers the reason that makes him calculate his ROI. Many deny the possibility of predicting future numbers and, in doing so, disregard ROI - blunder. Since, based on the numbers from my past seasons, it is possible to project the numbers for the next one. It is only statistics, but for any investor this projection is important and legitimate. This is why the standard deviation becomes so important.

Today the stakes are still something new, considerably recent in the world of investment. There is still prejudice against them, as well as little theory developed. I am one of the few theorists who shows his face to discuss such a subject. An interesting fact that all this is so new, is that we haven't named some of the measures. We already have in our bettor dictionary some words that stick in the mind. Something like "Drop", for example, which means dropping a bet, leaving that bet selection aside or not making that bet. We have the term "badrun", for a bad sequence. The word "Underdog". And like poker players, we talk about variance in the wrong way. We should put a name to that extent; I see in the name "Curve" a more correct way of referring to that term. Even for the reason that I have used this term for years in betting.

The objective here in this article is to show you, the reader, the importance of understanding how this "curve" period works, where we are in that mentioned deviation and the learning that we can extract from it. Everything in life is learning. It is a way that we have to adapt to these future fluctuations.

Both in life and in the investment world, this curve is nothing more than memories that will tell us what the future might look like. In different ways, of course. In life, the curve is there to teach you to value certain moments and situations. In investments, it offers the opportunity to outline a new strategy and redo its management. In addition to giving you peace of mind to invest.  The deviation is part of the trajectory. As much as you feel bad or strange when crossing this hardest path, it is only what it is. Just a few obstacles in the middle of the road, a simple winding curve. You just have to be careful when you walk this path.

A big hug to everyone!