Two Sigma Event
A two sigma event is an event that is expected to occur with a probability of about 95%. In a normal distribution, two standard deviations from the mean (average) cover about 95% of the data points. This means that if you have a normal distribution of data and you plot it on a graph, about 95% of the data points will fall within two standard deviations of the mean.
In the context of risk analysis or statistical quality control, a two sigma event might refer to an occurrence that is outside the normal range of expectations, but still within a reasonable level of risk. For example, if a manufacturing process is producing parts with a certain level of variability, a two sigma event might be a part that falls outside the expected range of that variability, but is still within acceptable limits for the process.
It’s important to note that the term “two sigma event” is used somewhat informally, and the specific definition may vary depending on the context in which it is used.