Z-scores indicate how many standard deviations a value is from the mean.
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A z-score (also called a standard score) indicates how many standard deviations an element is from the mean. A z-score can be positive (above the mean) or negative (below the mean). Z-scores are used to standardize values from different distributions for comparison.
z = (x - mean) / standard deviation
Where:
x = mean + (z * standard deviation)
For a normal distribution:
Given: Test score = 85, Mean = 75, Standard Deviation = 10
z = (x - mean) / std dev z = (85 - 75) / 10 z = 10 / 10 z = 1.0 Interpretation: The score of 85 is 1 standard deviation above the mean, placing it at approximately the 84th percentile.
Comparing test scores across different tests with different scales and difficulties.
Identifying outliers in manufacturing processes. Values with |z| > 3 are often considered outliers.
Analyzing stock returns, risk assessment, and portfolio analysis.
Standardizing data for statistical analysis, comparing results across studies.
For normally distributed data: