Suppose assets A and B both have return volatility (risk) of 30%, and their returns have...

Suppose assets A and B both have return volatility (risk) of 30%, and their returns have a correlation of 0.5. I invested half of my portfolio in A and half in B. What will be the return volatility (risk) of my portfolio?

Expert Solution

We see that the standard deviation of the portfolio=sqrt((w1*s1)^2+(w2*s2)^2+2*w1*s1*w2*s2*correlation)=sqrt((0.5*30%)^2+(0.5*30%)^2+2*0.5*30%*0.5*30%*0.5)=25.98076%

jeff jeffy answered 2 years ago

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Suppose assets A and B both have return volatility (risk) of 30%, and their returns have...

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