how does the sum of squares help in finance 
investors and analysts can use the sum of squares to make comparisons between different investments or make decisions about how to invest for instance you can use the sum of squares to determine stock volatility a low sum generally indicates low volatility while higher volatility is derived from a higher sum of squares the bottom lineas an investor you want to make informed decisions about where to put your money while you can certainly do so using your gut instinct there are tools at your disposal that can help you the sum of squares takes historical data to give you an indication of implied volatility use it to see whether a stock is a good fit for you or to determine an investment if you re on the fence between two different assets keep in mind though that the sum of squares uses past performance as an indicator and doesn t guarantee future performance correction may 18 2023 a previous version of this article misstated that the sum of squares is calculated by subtracting the data points from the mean it has been corrected to show that the mean should be subtracted from the data points 