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

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The beta coefficient is actually a better measure of a stock's relevant risk in a diversified portfolio because it measures the stock's volatility relative to the market, not its total or stand-alone risk. The standard deviation measures total risk, including both systematic and unsystematic risk, making it less relevant for diversified portfolios where unsystematic risk is minimized.

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