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What is the Z-Score?
The Z-score is a statistical measurement of one variables relationship to the mean (average) of a group of values. More specifcally, the Z-score states the number of standard deviations a variable lies from the mean of the group of values.
What Does a Z Score Show?
A zero Z-score indicates that the mean of the group and the value being tested is identical.
A one or negative one Z-score indicates that the value is one standard deviation from the mean.
A positive one indicates that it is one standard deviation above, while a negative one indicates that it is one standard deviation below the mean.
How is the Z Score Used?
Z-scores are measures of an observation's variability and can be put to use by traders in determining market volatility.