Definition of variance in sports betting
The variance is a statistical concept, which allows to calculate the dispersion of the average deviation from the expectation. In other words, assuming you are betting value bets, the variance in sports betting is the average difference between your expected and actual winnings.
In sports betting, when you bet with your average odds, you have an expectation of winning or at least of breaking even:
If you bet an average odds of 2, your expectation of no loss is 50% success (assuming you are in a fixed bet).
However, throughout your career, you will sometimes have x% success in one month, sometimes y% in another, sometimes z% in the following month, etc. The curve of your bankroll will therefore oscillate.
These oscillations represent the deviation from your expectation, these oscillations are nothing other than the variance. In short, a behaviour other than a rectilinear progression; at least in the short term.
The Notion of Probability
Now let’s go back in time and recall your mathematics lessons on probability. If you toss a coin, theoretically you have a 50% chance of getting heads or tails. However, in a series of 10 tosses, you will most likely get x number of tails and y number of heads. However, the more times you repeat the operation, the closer you will get to 50%.
We will use this image to understand the notion of both volume and smoothing of variance in sports betting.
Remember that in the short term, “what must happen will happen, no matter how hard you try to avoid it; what must not happen will not happen, no matter how hard you try to get it”.
The conventional wisdom on variance in sports betting
There is only a large volume of predictions to judge the profitability of a tipster
Prejudging the quality of a tipster by a series of losses as well as wins in a small sample size is an erroneous judgment.
There is nothing to indicate that the tipster is not in a variance with a downswing or upswing phase that characterizes the oscillations seen above.
In the image above, you can see the variance and its effects (oscillations represented by the upswing and downswing phases) on the Club’s bankroll over a period of 1002 beats.
How do you smooth out the variance in sports betting?
Sports contingency and imponderables
None of us would argue that we have never had a long losing streak. Never having lost or placed a bet at the last minute, on a stroke of luck or misfortune?
By an unexpected fact of play such as a red card or an unforeseen injury, etc…
A whole list of imponderables, i.e. unforeseeable events that can tip the match. Imponderables at the very source of sport. Let’s not forget that sports betting is first and foremost subject to the vagaries of sport. And this will help us to understand the rest…
What does smoothing the variance mean?
Smoothing the variance means minimising its effects over the long term. It means obtaining a more or less straight progression in the long term. This progression can be positive or negative, but it leaves no room for chance. No room for imponderables!
That’s why we talk about a minimum sample of 500 predictions to know if you are a profitable bettor or not. The larger the sample size of your predictions, the more the luck factor disappears. This is called smoothing the variance.
Make Volume to reduce the impact of variance on your results
The more volume you do, i.e. the larger the sample of sports bets you have, the closer your actual winnings will be to your expected winnings.
This is not illogical and has been theorised in mathematics by the law of large numbers.
This concept explains that when the same event based on chance is repeated a large number of times, the average of the results obtained tends to approach the expectation of the event.
This is exactly the image of the coin toss that I demonstrated in the introduction. Your expectation is 50% and the real result will tend towards 50/50 with the greatest number of throws possible. Except that if you toss the coin only 10 times, it is possible that you will only get 2 tails… By tossing it 500 times the gap will be reduced.
This implies that the more you tend to judge a balance sheet with the fewest possible counted beats, the more you will apply the law of small numbers to which a high variance is subject.