Excel Variance Calculation: A Comprehensive Guide for Accurate Analysis

What is variance?

Variance is the measure of variability of a data set that indicates how far different values are spread. Mathematically, it is defined as the average of the squared differences from the mean.

In this article, we will understand how to calculate variance in Excel, providing you with a comprehensive guide to master this essential statistical tool.

Excel offers six built-in functions for calculating variance, each serving a specific purpose. These functions are VAR, VAR.S, VARP, VAR.P, VARA, and VARPA. Choosing the right function depends on three key factors:

1. The version of Excel you're using
2. Whether you're working with a sample or population variance
3. Your preference for including or excluding text and logical values in your calculations

To help you move along these options, let's break down the different variance functions available in Excel:

1. VAR.S and VAR: These functions calculate the sample variance, ideal for when you're working with a subset of data.
2. VAR.P and VARP: Use these for population variance when you have data for an entire population.
3. VARA: This function calculates sample variance while also considering text and logical values.
4. VARPA: Similar to VARA, but for population variance.

It's important to note that VARA and VARPA differ from the other variance functions in how they handle logical and text values within references. These functions can be particularly useful when your dataset includes non-numeric information that you want to factor into your variance calculations.

1. VAR.P Function in Excel

The VAR.P function calculates the variance assuming that the entire population is its argument. It is used when you have data for the whole population and ignores text and logical values.

=VAR.P(value1, value2, ...)

2. VAR.S Function in Excel

The VAR.S function calculates the variance assuming that the data is a sample of the population. It is used when you have a subset of the population data and also ignores text and logical values.

=VAR.S(value1, value2, ...)

3. VARA Function in Excel

The VARA function calculates the variance for a sample of the population, but unlike VAR.S, it includes text and logical values in its calculations. Logical values are treated as 1 (TRUE) and 0 (FALSE).

=VARA(value1, value2, ...)

4. VARPA Function in Excel

The VARPA function calculates the variance for the entire population and includes text and logical values in its calculations. Logical values are treated as 1 (TRUE) and 0 (FALSE).

=VARPA(value1, value2, ...)

5. VAR Function in Excel

The VAR function calculates the variance for a sample of the population using the "n-1" formula, which adjusts for bias in the sample variance calculation. It ignores text and logical values.

=VAR(value1, value2, ...)

6. VARP Function in Excel

The VARP function calculates the variance for the entire population, similar to VAR.P, but it was used in older versions of Excel. It also ignores text and logical values.

=VARP(value1, value2, ...)‍

How to Calculate Sample Variance in Excel

To calculate sample variance in Excel, you can use the VAR, VARA, and VAR.S functions. Here’s how you can do it:

Ensure your data is in a single range of cells in Excel.

For data in A1:A20, if your data represents the entire population, enter the formula =VAR.P(A1:A20). Alternatively, if your data is a sample from a larger population, enter the formula =VAR.S(A1:A20).

If you're using Excel 2007 or earlier, or if you want your file to be compatible with these versions, the formulas are: =VARP(A1:A20) for the entire population, or =VAR(A1:A20) for a sample from a larger population.

The variance for your data will then be displayed in the selected cell.