how to know the amount of risk added to a portfolio

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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 1 year ago

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