Arithmetic Vs. Geometric in stock market
Hellow friends lets understand.
very interesting subject to find difference between these two factors.
In practical life, arithmetic principles and
geometric principles have different uses. Take a look at their difference:
·
Arithmetic
Following are the practical-life uses of
arithmetic:
1.
Managing
Time
People must manage time to perform multiple
tasks in a day and make the day purposeful. Knowledge of arithmetic helps to
set a justifiable deadline and complete tasks within the given time. Moreover,
it is also essential for creating day-to-day timetables. These tasks help to
manage time wisely.
2. Budgeting
Everybody leads their life with a limited amount
of money. However, a budget is required to keep the expenses in check and save
for the future. Arithmetic operations help to calculate the expenses in sectors
of life and make savings.
3.
Exercising
Workout becomes effective when one meets their
daily count of a specific exercise. Counting is an operation of arithmetic.
Thus, arithmetic helps to stay fit.
4.
Driving
Driving a car or bike is all about a sequence of
calculations required for reaching the destinations. Commonly, driving a car
incorporates kilometers that help travel quickly and find the best route to get
to the destination.
5. Home Decorating
Wallpaper is an essential element of home
decoration. Every house or room comes in different sizes. However, most
wallpaper is available in measures of meters and square meters. Calculating the
perimeter of a wall and then converting it into square meters is essential to
buy and use the required quantity of wallpapers.
6.
Stitching
and crocheting
Arithmetic is one of the essential components of
couture. Calculating the number of stitches or crochets required or made in a
piece helps to make every similar item flawless. Additionally, it requires
measurements of the person for whom a dress is designed and estimating the cost
and profit, and length of cloth needed to develop the piece. These things can
only be performed by utilizing arithmetic operations.
7.
Critical
Thinking
Arithmetic also enhances the ability to think
critically, like solving puzzles, analyzing, etc.
·
Geometric
Here are some
practical-life uses of geometric:
1. Construction Of Buildings
Geometry plays an essential role in the
construction of buildings. It is used to create dams, buildings, rivers, temples,
etc.
2. Computer Graphics
Computer graphics also take the help of
geometry. Furthermore, geometry also helps in creating infotainment or
entertainment audio-visual presentations. Apart from that, it also helps in
determining the connection of distance with the shape of the object. Moreover,
the concepts of geometry play a crucial role in designing smartphones, laptops,
computers, etc.
3. Sports
Without the knowledge of math, it is impossible
to keep track of scores for sports activities. Geometry and trigonometry help
enhance their skills in sports. In short, geometric calculations help to decide
the best way to strike the ball or reach a basket.
4. Art
Geometry also helps artists. Drawing angles,
measuring proportions, and getting perspectives about an artwork becomes easy
through geometry.
5. Measuring Orbits And Planetary Motions
Astronomers employ geometric calculations and
concepts to track the movement of stars and compute the orbits and the space
between planets and satellites.
Arithmetic Vs.
Geometric: History
Arithmetic
concepts and uses did not start at the time of the introduction of geometric
uses and concepts. Following is the difference in their history.
·
Arithmetic: It is believed that
arithmetic principles were introduced 10,000 years ago in prehistoric times
when people started farming.
·
Geometry: Geometry was
introduced in 3000 BC. Euclid, the father of geometry developed it first in
Greece.
Arithmetic vs.
Geometric: Benefits
The
benefits you draw from arithmetic is different from the one you gain from
geometric. The following are the differences:
·
Arithmetic
The
pros of arithmetic are as follows:
·
Easy to calculate
·
Follows fixed patterns
·
Easy to understand
·
Geometric
The
perks of geometric are as below:
·
Rigidly defined and follows the patterns
·
Understanding geometric sequences can help in using algebraic
equations accurately.
Arithmetic vs. Geometric: Drawbacks
There are many drawbacks to both arithmetic and
geometry. However, the drawbacks of arithmetic are contrasting with that of
geometric. The following are the differences:
·
Arithmetic
Here are the drawbacks of arithmetic
·
Precise averages of
ratios and percentages can never be derived.
·
Finding averages of
highly skilled data is impossible
·
Geometric
Here are the disadvantages of geometric:
·
Difficult to compute
·
Understanding geometric
patterns can at times be difficult.
Arithmetic Vs. Geometric: Sequencing Examples
Here are the differences between arithmetic and
geometric in terms of sequencing examples:
·
Arithmetic
Here are some examples of arithmetic sequencing:
·
Following is the
arithmetic sequence with a difference in the successive terms:1, 4, 7, 10, 13,
16
·
The arithmetic sequence
of the following numbers is with a difference of 5 numbers: 28, 23, 18, 13, 8
·
Geometric
Find the samples of geometric sequencing here:
·
In the following
sequence of numbers of the geometric sequence, each successive term is three
times a multiple of the previous number: 2, 6, 18, 54, and 162.
·
The following geometric
sequence of numbers includes a successive term that is one-fourth the value of
the previous number: 64, 16, 4, and 1.
Arithmetic vs. Geometric: Nature of sequence
Arithmetic and geometric has different nature of
sequencing numbers. The differences are as follows:
·
Arithmetic: Arithmetic sequences are divergent
·
Geometric: Geometric sequences can be convergent or
divergent
Arithmetic Vs. Geometric: Features Of Successive Terms
The results of the successive terms of
arithmetic and geometric are different. The following are the differences:
·
Arithmetic: The successive terms highlight a common
difference.
·
Geometric: The successive terms showcase a common
ratio.
Arithmetic vs. Geometric: Variation
Different variations can be observed in the case
of arithmetic and geometric terms.
·
Arithmetic: It shows linear variation.
·
Geometric: It shows the exponential variation
The Bottom Line
The discussion above highlights the difference
between arithmetic vs. geometric. It is important to have a clear idea of the
two branches of mathematics. Arithmetic is the foundation of mathematics. It
deals with numbers and the operations of numbers like addition, subtraction,
multiplications, and division. In contrast, geometry is concerned with the
measurement, properties, and relationships of points, lines, angles, surfaces,
and solids. Moreover, knowledge of these differences helps you to gain interest
in math and reduces the fear towards the subject.
An investor
invests INR 100 and receives the following returns:
- Year
1: 3%
- Year 2: 5%
- Year
3: 8%
- Year 4:
-1%
- Year
5: 10%
The
INR 100 grew each year as follows:
- Year
1: 100 x 1.03 = 103.00
- Year
2: 103 x 1.05 = 108.15
- Year
3: 108.15 x 1.08 = 116.80
- Year
4: 116.80 x 0.99 = 115.63
- Year
5: 115.63 x 1.10 = 127.20
·
The
geometric mean is:
·
[ ( 1.03 * 1.05 * 1.08 * .99 * 1.10 ) (1/5 or
.2) ] - 1 = 4.93%.
·
The
average annual return is 4.93%, slightly less than the 5% computed using the
arithmetic mean.
An investor
holds a stock that has been volatile, with returns that varied significantly
from year to year. His initial investment was INR100 in stock A, and it
returned the following:
- Year 1: 10%
- Year 2: 150%
- Year 3: -30%
- Year 4: 10%
In this example, the arithmetic mean would be 35% [(10+150-30+10)/4].
However,
the true return is as follows:
- Year
1: 100 x 1.10 = 110.00
- Year
2: 110 x 2.5 = 275.00
- Year 3: 275
x 0.7 = 192.50
- Year 4: 192.50
x 1.10 = 211.75
The resulting geometric mean, or a compounded annual compounded annual growth rate. (CAGR), is 20.6%, much lower than the 35% calculated using the arithmetic mean.
|
Basis |
Geometric Mean |
Arithmetic Mean |
|
Meaning |
Geometric mean is the multiplicative mean. |
Arithmetic mean is known as additive mean. |
|
Formula |
{[(1+Return1) x (1+Return2) x
(1+Return3)…)]^(1/n)]} – 1 |
(Return1 + Return2 + Return3 + Return4)/ 4 |
|
Values |
Due to the compounding effect, the geometric
mean is always lower than the arithmetic means. |
The arithmetic mean is always higher than
the geometric mean as it is calculated as a simple average. |
|
Calculation |
Suppose a dataset has the following numbers
– 50, 75, 100. The geometric mean is calculated as the cube root of (50 x 75
x 100) = 72.1. |
Similarly, for a dataset of 50, 75, and 100,
the arithmetic mean is calculated as (50+75+100)/3 = 75 |
|
Dataset |
It applies only to only a positive set of
numbers. |
It can be calculated with both positive and
negative sets of numbers. |
|
Usefulness |
Geometric mean can be more useful when the
dataset is logarithmic. The difference between the two values is the length. |
This method is more
appropriate when calculating the mean value of the outputs of a set
of independent events |
|
Effect of Outlier |
The effect of
outliers on the Geometric mean is mild. Consider the dataset 11,13,17 and
1000. In this case, 1000 is the outlier. Here, the average is 39.5. |
The arithmetic mean
has a severe effect on outliers. In the dataset 11,13,17 and 1000, the
average is 260.25. |
|
Uses |
The geometric mean
is used by biologists, economists, and financial analysts. Therefore, it is
most appropriate for a dataset that exhibits correlation. |
The arithmetic mean
is used to represent average temperature and car speed. |
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