The volatility is a term widely used in financial markets to measure the risk of the different assets. The higher the volatility the higher the risk and vice versa. A rational investor will only want to take more risk and therefore assume a higher volatility if the expected return is higher and therefore he is rewarded for that higher risk.
However, little is said about volatility and risk in sports betting. From a statistical point of view, a low volatility for a tipster means his potential deviation against his yield is likely to be low. That is, it’s more likely that in the future his yield will diverge less from his current yield (below but also above) and therefore his current yield is more reliable. If you follow the picks of 2 tipsters, under an equal yield, it is better to follow that whose tips generate a smoother profit line. That’s why our Rating incorporates the volatility of results as a factor. Between 2 tipsters with the same yield and number of bets, that with a lower volatility will have a higher rating.
The volatility of your betting results depends on 2 variables: your stakes and the odds. The lower your odds and the more rational is your staking plan (lower stakes for higher odds and vice versa) the lower your volatility. Those tipsters whose combination of stakes and odds translates into betting outcomes with a lower deviation from its mean will have a lower volatility.
On the other hand, we should take into account that volatility measures past performance. The future volatility could change due to a change in the staking plan or even the luck.
The average volatility of the more than 1,200 Tipsters of Pyckio, who had more than 100 picks and a positive yield (as of April 22, 2015) is 0.89. In the Gaussian bell curve above you can see the distribution. The volatility of 50% of our tipsters ranges between 0.79 and 1.04. For 25% of them it’s lower than 0.79 and for the other 25% it’s higher than 1.04.
To sum up, the volatility is a very important concept in sports betting that should be taken into account when analysing a tipster track record. Yield, number of bets and volatility are the variables our Rating incorporates to analyse a Tipster. The higher the number of bets and the yield and the lower the volatility the more likely is that the tipster won’t deviate in future from his current yield and therefore the more trustable he is.
In the next days we’ll show the volatility of all our Tipsters in the Ranking page.