The arithmetic average of a series of number is the sum of all the numbers in the series divided by the total numbers counts in the series. Arithmetic mean is best used in a situation wherein the variables are not dependent on each other and data sets are not varying extremely. Such as calculating the average score of a student in all the subjects.
Unlike the geometric mean, arithmetic mean does not take into account the impact of compounding and therefore it is not best suited to calculate the portfolio returns.
If there are two numbers X and Y in the series:
Arithmetic mean = (X+Y)/2
