A stock's standard deviation determines how the stock affects the riskiness of a diversified portfolio, therefore it is a better measure of a stock's relevant risk than is the beta coefficient, which measures total, or stand-alone, risk.

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The beta coefficient is a better measure of a stock's relevant risk in a diversified portfolio because it measures the stock's sensitivity to market movements, whereas standard deviation measures total risk, including both market and unique risks.

A Stock's Standard Deviation Determines How the Stock Affects the Riskiness