how to know the amount of risk added to a portfolio

Expert Solution

We can know the amount of risk added to a Portfolio through various kind of analysis and those are as follows-

A .we can be calculating the risk added to a Portfolio through analysing of the standard deviation of the new stock into the portfolio and we can be assured about the total portfolio risk which has been added by new stock to portfolio

B. we can also calculate the systematic risk which have beenbeen added to the portfolio by Capital Asset pricing model and which will be reflected through beta

C. Total risk to the portfolio can also be ascertained through arbitrage pricing model theory in which various factors which lead to increase in risk are analysed separately.

D. we can also be trying to find the risk added to the portfolio by comparing it with the previous risk of the portfolio through expected rate of return.

E. we can also analyse the risk associated with the portfolio by analysing the volatility index of the overall market

F. We can also analyse the risk of a Portfolio through analysing of coefficient of correlation in respect to the overall portfolio.

jeff jeffy answered 2 years ago

True or False. When we combine stocks in a? portfolio, the amount of risk that is...

True or False. When we combine stocks in a? portfolio, the amount of risk that is eliminated depends on the degree to which the stocks face common risks and move together.

Portfolio Risk and Return Given the following portfolio Stock Amount (MV) Beta Return CAPM A $10,000...

Portfolio Risk and Return Given the following portfolio Stock Amount (MV) Beta Return CAPM A $10,000 1.1 13.50% B $5,000 1.4 14.00% C $6,000 1.5 7.50% D $13,000 0.7 8.50% E $16,000 1.9 19.80% Total $50,000 Risk free rate 3.00% market return 12.00% Portfolio return Portfolio beta Portfolio CAPM

1-risk and portfolio How we decrease the risk in a portfolio? What actions should we follow?...

1-risk and portfolio How we decrease the risk in a portfolio? What actions should we follow? 2-investor and stock markets What is the biggest fear for an investor? In your opinion, what is it that should bother the investor the most?

what is Portfolio? How does a stock or asset within a portfolio impact the overall Risk...

what is Portfolio? How does a stock or asset within a portfolio impact the overall Risk and Return of the Portfolio? Provide a simple example

How does changing the heating time affect the amount of heat added?

Explain how total portfolio risk can be decomposed in various risk exposures and indicate why risk...

Explain how total portfolio risk can be decomposed in various risk exposures and indicate why risk decomposition can be a complex exercise.

The price of risk measures how risk and return can be traded off in making portfolio...

The price of risk measures how risk and return can be traded off in making portfolio choices. Assume that the standard deviation of a risky asset is 2.00% (and does not change) with a return of 8.00%. You also have the choice to invest in a risk-free asset with return 4.00%. If the risk-free return increases by 1.00 percentage points and the risky asset return increases by 7.00 percentage points, what is the change in the price of risk (in...

How can risk management be described as a process? Discuss portfolio of risk management with suitable...

How can risk management be described as a process? Discuss portfolio of risk management with suitable examples. Risk analysis after risk recognition is a complete step for risk management. If not, then discuss complete steps of risk management. What do you understand by risk management approaches? Give your opinion on each approach as to whether they are perfect to manage the risks? What do you mean by risk aversion? Discuss about your attitudes of risk with evidences and examples. Discuss...

How do you measure the expected return & risk of a portfolio? How the concept of...

How do you measure the expected return & risk of a portfolio? How the concept of correlation between asset returns is used in portfolio diversification? Explain.

How to split portfolio into systematic and unsystematic risk? What is the formula for ri? How...

How to split portfolio into systematic and unsystematic risk? What is the formula for ri? How is rp=rf +portfolio beta(r m-rf) + e derived?

Question