How to Use the Weighted Average Formula in Excel

When to Use a Weighted Common

Use a weighted common when values have differing significance. However what precisely does that imply?

Right here’s an instance. Let’s say I’m trying to purchase a brand new house, however I’m unsure what the typical market worth is in my neighborhood. My finances is $350,000, so I take a look at costs on 5 totally different houses:

• $1,000,000
• $800,000
• $400,000
• $300,000
• $250,000

If I exploit the easy common system, I get $550,000, which is effectively out of my value vary. The issue? My common is unsuitable. It’s because I haven’t accounted for what number of houses are promoting at every value level. Right here’s the listing once more, however with the variety of houses promoting at that value in brackets.

• $1,000,000 (1)
• $800,000 (2)
• $400,000 (10)
• $300,000 (25)
• $250,000 (15)

Utilizing the weighted common system lets me bear in mind that just one house is being bought for one million {dollars}, whereas 25x extra houses are on the $300,000 value level. Utilizing the weighted common system, I get a median of $336,792, which is true in my wheelhouse.

It’s like magic, proper? Right here’s the way it works.

Calculate Weighted Common in Excel

To calculate the weighted common in Excel, use the SUMPRODUCT and SUM capabilities within the following system:

=SUMPRODUCT(X:X,X:X)/SUM(X:X)

This system works by multiplying every worth by its weight and mixing the values. Then, you divide the SUMPRODUCT by the sum of the weights on your weighted common.

Nonetheless confused? Let’s go over the steps within the subsequent part.

Utilizing SUMPRODUCT to Calculate Weighted Common in Excel

Listed below are my steps for utilizing SUMPRODUCT.

1. I enter my knowledge right into a spreadsheet after which add a column containing the load for every knowledge level.

2. Subsequent, I sort =SUMPRODUCT to begin the system and enter the values.

3. Lastly, I click on enter to get my outcomes.

Right here’s what’s taking place underneath the hood.

First, the equation multiplies every rating by its weight:

• 86 x 15 = 1290
• 55 x 10 = 550
• 78 x 20 = 1560
• 92 x 15 = 1380
• 64 x 40 = 2560

Subsequent, it combines these values:

• 1290 + 550 + 1560 + 1380 + 2560 = 7340

Lastly, the equation divides the mixed worth by the entire worth of our weights:

• 7340 / (15 + 10 + 20 + 15 + 40) = 73.4

Discover Weighted Shifting Averages in Excel

A helpful variation on the weighted transferring common is the weighted transferring common.

Once I use a weighted transferring common, I can calculate the typical over a set interval at the same time as I add new knowledge or give extra weight to sure values. This might help establish traits and patterns extra simply.

For instance, if I do know the variety of views my web site acquired within the final 5 days, I can simply decide the typical views in a five-day interval.

Subsequent week, I would like the identical worth however from the newest 5 days, not the 5 days from the earlier week. This implies I’m utilizing the identical period of time however updating the info to generate a median that accounts for brand new knowledge.

To discover a weighted transferring common, you give extra weight to values primarily based on time.

Within the instance above, I assign weight to web site views primarily based on recency. Newer views (people who occurred yesterday) are given extra weight than people who occurred 5 days in the past. Because of this every day I calculate by transferring common, the weights change.

Right here’s what it appears to be like like:

For the primary set of 5 days, I get 100, 200, 150, 300, and 100 views. I assign every of today a weight, with the newest day having the best weight. To maintain issues easy, I’m going to make use of weights that add as much as 100.

• Day 1: 10 (x 100)
• Day 2: 15 (x 200)
• Day 3: 15 (x 150)
• Day 4: 25 (x 300)
• Day 5: 35 (x 100)

To get my weighted common, I exploit the system from the earlier part. I multiply every worth by its weight and divide by the sum of the weights. For the values listed, we get: 172.5

On day six, I run the weighted transferring calculation once more with new numbers. Our earlier Day 1 is not relevant — it’s been changed by the values from Day 2, which are actually our Day 1. We even have a brand new set of knowledge from Day 6 (general), which is now our Day 5.

Because of this the totals for days 2, 3, 4, and 5 all apply — they simply shift someday to the left. Our new Day 5, in the meantime, will get 200 views. Our weights say the identical; all that modifications are the variety of views since they’re tied to the newest 5 days.

Utilizing our new knowledge, our weighted transferring common is calculated like so:

• Day 1: 10 (x 200)
• Day 2: 15 (x 150)
• Day 3: 15 (x 300)
• Day 4: 25 (x 100)
• Day 5: 35 (x 200)

In consequence, we get a brand new common, which is: 182.5

In Excel, you’ll have to manually enter this system in every relevant cell.

WMA = [value 1 x (weight)] + [value 2 x (weight)] + [value 3 x (weight)] + [value 4 x (weight)] + [value 5 x (weight)] / complete weight

Higher Than Common: Mastering Excel Operations

When you get the cling of it, I feel utilizing the weighted common system turns into fairly simple. All it takes is just a little apply. Whereas the weighted transferring common is barely extra difficult, it’s an effective way to trace efficiency knowledge over time.

However that’s simply the tip of the Excel iceberg. With apply and just a little assist from our Excel hacks information, you’ll be able to grasp the artwork of equations. Test it out under.

Editor’s observe: This put up was initially revealed in April 2022 and has been up to date for comprehensiveness.