Re: Quantifying the profitability of the short-stack strategy
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You are talking about standard deviation, right?
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Variance is simply standard deviation squared.
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and a lower winrate means a larger standard deviation right?
so they have more variance.
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No. Win rate and standard deviation have virtually no co-relation with each other.
Now, if we're talking specifically about the "coefficient of variation" then maybe.
CV is the std devation divided by the win rate, and as Pete alluded to, this is the fundamental measure of how likely you are to go broke.
Even if we agree that a short stacker's winrate is lower, since their standard deviation is lower too it's far from clear who is morelikely to go broke.
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