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4 Examples of Relative Risk

 , April 19, 2018
Relative risk is the ratio of the risk faced by one group to the risk faced by another group. This can be used to express the risk of a state, behavior or strategy as compared to a baseline risk.


Relative risk is based on the probabilities of risk for two different groups as follows.
Relative risk = group-1-probability / group-2-probability

Example #1

People who smoke have a 10% lifetime chance of developing a particular type of cancer. Non-smokers have a 0.5% chance of developing the cancer.
Relative risk = 0.10 / 0.005 = 20
This means that smokers are 20 times as likely to get the disease as non-smokers.

Example #2

Snowboarders in their 20s have a 1% chance of an injury requiring a hospital visit in a year. Non-snowboarders in their 20s have a 0.5% chance.
Relative risk = 0.01 / 0.005 = 2
As such, snowboarders in this age group are twice as likely to require a hospital visit for an injury.

Example #3

A company with a high debt load has a 40% chance of going bankrupt in the next 5 years. The average for comparable companies of the same size is a risk of 0.5% over five years.
Relative risk = 0.40 / 0.005 = 80
The company is 80 times more likely to go bankrupt than its peers.


Examples are illustrative.
Overview: Relative Risk
DefinitionThe ratio of the risk faced by one group to the risk faced by another group.
Also Known AsRisk Ratio
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