Such terms as “variance” and “volatility” are often used to describe online casino slots. People use them interchangeably to describe the deviation from the estimated mathematical expectation, i.e., the risk level in the game. But are these terms really synonymous? Experts of Slotegrator did research and puzzled out whether there is a difference between variance and volatility.
WHAT IS VARIANCE?
The term "variance" is mostly applied in poker, however, at the same time, it concerns online slot machines. It is a statistical term that describes the range of deviations from the expected value. Speaking about the online casino games, variance shows the deviation from the specific values of RTP (return to player).
Here is an example: RTP in slot is 98%, this means that 98% of the invested money will be returned to the players. The return percentage is possible to calculate under condition of a large number of players and a long-lasting game. Thus, with a small number of spins, the RTP is not observable, and the variance will increase. At the same time, a large number of bets will decrease the variance, and the percentage of RTP will tend to be closer to the specified value.
WHAT IS VOLATILITY?
Unlike the variance, the volatility has more to do with the gameplay. It identifies the qualitative and quantitative characteristics of winnings: how often and in what amount the money prize will drop down. There are three types of volatility: low, high and medium. Let us consider each of them.
Slots with low volatility level are the games with little risk. Generally, it gives frequent but small winnings. Such slots are favoured by casino gamblers who are not looking for big jackpots and prefer having small but frequent payouts. You can also win big in slots with low volatility; however, it happens very rarely.
Slots with low volatility: Justice League (Nextgen), Playboy Gold (Microgaming), Flaming Reels (GameArt), All Ways Win (Amatic).
High volatility is just the opposite of the low one. This means that the player making a large number of spins stays next to nothing but at some point, the luck may smile and he can hit the jackpot. Slots with high volatility are very popular among those who love to play big and ready to wait patiently for a big win while losing every spin.
Slots with high volatility: Crystal Sevens (Platipus Gaming), Cinderella (Platipus Gaming), Medusa II (Nextgen), High Society (Microgaming).
It is easy to guess that the medium volatility is the golden mean between high and low ones. That is why many modern online gaming machines have a medium risk level. Such slots generally give out average winnings, and players don’t have wait long to win cash awards.
Slots with medium volatility: Fortunium (Microgaming), Sakura Fruits (Amatic), Snowing Luck (Spinomenal), Jack O'Lantern vs The Headless Horseman (Red Rake).
HOW TO CALCULATE VARIANCE AND VOLATILITY?
It is a mistake to think that volatility and variance are abstract notions – on the contrary, they are easily measured. Basing on own gaming experience, studying slots description, as well as winning combinations statistics and their sizes gamblers can determine the level of the slot volatility. This indicator helps choose the slots according to your personal preference: whether you want to win big and with great risk to lose fast, or whether you want to play long receiving minimum wins.
Knowledge of the variance level is more useful to online casino owners so they could track the profit of the project. Here is an example: if many gamblers play the slot and make small bets at $1, then the variance will be low. However, if high rollers get into the game making bets of $100, the variance will increase. After all, the payout x100 for $1 and $100 is a big difference.
Schematically, the level of variance looks like this:
Red line indicates the high variance at large bets.
Green line indicates the low variance at small bets.
Oddly enough, the concepts of volatility and variance are often confused and used interchangeably. However, if you delve into the details, you notice that these terms are different. In the description of the slot characteristics, it is more appropriate to use the word "volatility" where the word "variance" is used. Thus, volatility is programmed by the developer and indicates a certain level of risk that the player is willing to take choosing a particular slot. While variance is the spread in values of win size in reference to the size of the bets.