Sports betting has its ups and downs, so it’s important to understand the concept of variance and how it can affect your results. Variance refers to the degree of uncertainty or risk attached to a particular bet or series of bets, and is a major factor in winning/losing runs.
High variance bets have a wider range of potential outcomes and are riskier, while a low variance bets have a smaller range of potential outcomes and are less risky.
Understanding variance is crucial for analysing the risk-reward ratio of a bet or betting strategy. So in this article, I explore the key differences between high and low variance bets and how they can impact your sports betting results. This will help you to take a more effective and predictable approach to sports betting.
In statistics, variance is a measure of how spread out a set of data is. It measures the average distance of each data point from the mean (average) of the data set. A high variance indicates that the data is more spread out, while a low variance indicates that the data is more clustered around the mean.
So how does this translate to sports betting?
In sports betting, variance refers to the degree of uncertainty or risk attached to the bets placed. A high risk betting strategy is likely to produce erratic results, with a profit that heavily fluctuates; this is known as a high variance strategy. On the other hand a low risk strategy is likely to produce steady, more predictable results with less aggressive fluctuations to the profit; this is known as a low variance strategy. Let’s discuss these two extremes in more detail.
High variance in betting refers to a high level of risk associated with a particular bet. When a bet has high variance, it means that there is a wide range of possible outcomes, and the chances of winning or losing the bet are less predictable. High variance bets typically have high odds, with a higher potential payout if they win. This means a higher likelihood of losing.
For example, a bet on an underdog team in a sporting event would be considered a high variance bet.
Another example of a high variance bet would be for a specific player to score the first goal in a football match. This bet has high variance because there are many players on the pitch that who could potentially score the first goal, and the outcome is not entirely predictable.
It’s important to note that sports betting variance can be increased by raising the stakes of a strategy, creating larger deviations from the expected value.
Low variance in betting refers to a lower level of risk associated with a particular bet. When a bet has low variance, it means that there is a narrower range of possible outcomes, and the chances of winning or losing the bet are more predictable. Low variance bets typically have lower odds, with a lower potential payout if they win. This means a lower likelihood of losing.
For example, a bet on a heavily favoured team in a sporting event would be considered a low variance bet.
Another example of a low variance bet would be on the total number of points scored in a basketball game. This bet has low variance because the outcome is based on a statistical average of both teams’ scores, and the chances of the actual score falling within a specific range is, generally, quite predictable.
Sports betting variance can also be decreased by lowering the stakes of a strategy, creating smaller deviations from the expected value.
What Approach Is Most Profitable?
Neither high variance nor low variance is inherently more profitable in sports betting. Strategies involving both, or either, extremes can be profitable. The significant difference between both approaches is that:
- A high variance strategy is more likely to deviate from the mean or expected value. This is because it is more likely to experience big wins or losses.
- A Low variance strategy is more likely to produce results closer to the mean or expected value. This is because it will experience less large wins or losses.
Ultimately the long-term profitability of a betting strategy comes down to the value obtained in the bets, and not the risk factor attached to them. This means that some risky, high variance strategies are very lucrative — albeit run the risk of blowing the bankroll. Equally, some low variance strategies are able to preserve the bankroll over a long series of bets — but aren’t profitable whatsoever.
An Example Of Variance In Betting
It’s easy to get carried away when you’re winning, or downbeat when you’re losing, but it’s important to remember that variance is a normal part of sports betting. Swings in results exist in any form of gambling.
To illustrate this point, let me share an example of variance from my own experience. I conducted a Mug Betting Experiment, where I bet on every Premier League fixture and based my selections on my own opinion. I tracked my progress on a weekly basis.
At first, the Mug Bets were doing great, but as I expected, normality eventually set in. The run of excellent form was followed up by a run of losses that cancelled out many exceptionally profitable weeks. As a result, my profits swung from +£180 down to +£100 very quickly. This kind of fluctuation is not unusual in sports betting, and perfectly illustrates variance.
From +£180 down to +£100…
The Mug Betting Experiment saw many more large fluctuations in its results — both positive and negative — until it eventually settled at a 0.00% ROI after 270 bets at the end of the trial.
Importantly, I didn’t raise or lower my stakes at any point because I had no rational reason to believe my ludicrous experiment had any form of edge (advantage). This proved to be a very wise decision because, ultimately, I demonstrated that my approach was not a profitable one. Raising my bet sizes due to a winning streak would’ve been catastrophic to the overall PnL.
As I’ve stated in other articles: successful betting not about what you’ve made before, or how many winners you’ve selected. It’s about consistently hitting on value, full stop. So be aware that variance could be masking the true potential of your approach.
How To Control Variance In Betting
Controlling variance in sports betting is challenging because the results depend on events which are out of our hands. However, there are several strategies that bettors can use to minimise the impact of variance on their overall results:
- Bankroll management: One of the most important factors in controlling variance is proper bankroll management. Bettors should set aside a specific amount of money for betting and only bet a small percentage of their bankroll on each individual bet. This helps to minimise losses during losing streaks and keeps the bettor in the game for the long term. Learn more about managing your bankroll.
- Capping the odds: Bettors can also control variance by betting on low variance outcomes with shorter odds. For example, bettors could limit their odds to those under 3. This approach would produce lower payouts — but there’s also less risk of losing a substantial amount within a short timeframe.
- Lower bet sizes: Reducing the bet size lowers the variance and means that you’ll experience smaller fluctuations in your bankroll, since you’re risking less money on each individual bet. This reduces the impact of losing streaks or unlucky outcomes on your overall bankroll.
- Hedging: Hedging involves placing bets on both sides of a particular outcome in order to minimise losses. While hedging can reduce the potential payout (and cut into value), it can also limit the impact of variance and help bettors to preserve their bankroll.
- Utilising multiple betting strategies: Instead of relying on a single betting strategy, bettors can use multiple strategies to minimise the impact of variance. For example, a bettor may use a low variance strategy for some bets and a high variance strategy for others, depending on the specific situation. This reduces the risk of putting all eggs in one basket.
- Analysing data: Finally, bettors can control variance by analysing data and making informed decisions based on findings from that data. By researching teams, players, and trends, bettors can make more accurate predictions and reduce the unpredictability of results.
The Importance Of A Large Data Set
A large data set is essential for reducing variance and improving the accuracy of predictions in sports betting. By analysing a significant amount of data, such as team and player statistics, bettors can gain a clearer understanding of the trends and patterns that affect the outcomes of sporting events.
When analysing one’s own betting performance, a sufficient number of data points is necessary for reliable conclusions. For example, let’s say a bettor places three £50 bets every weekend, resulting in 80 total bets and £4,000 in total stakes over six months. While this may seem like a substantial amount of bets to go by, it’s not enough to draw reliable conclusions from due to variance.
Without a sufficient number of data points, it’s difficult to assess the true performance of a betting strategy. Variance can have a significant impact on results, leading to under or over-performance. Collecting enough data allows bettors to accurately estimate the level of risk and profitability of a particular bet or strategy.
Over a large set of data, the return on investment (ROI) of any strategy will converge to where it belongs. It’s similar to a casino with a fixed house edge on Roulette. The house doesn’t always win on every spin, and profitability can swing enormously. Yet over time the casino’s advantage reveals itself in their profits. This phenomenon is inescapable and emphasises the importance of analysing large data sets to make fair, rational judgements.
I also recommend reading my post on betting Strike Rates, as it nicely ties in with variance.
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