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Calculating Portfolio Standard Deviation

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If the correlation between D and E are o.5 and D has a standard deviation of 0.4 and E has a standard deviation of 0.6, what would be their comboned portfolio standard deviation if you put 40% in D?

I could get the answer, however, I am thrown by the addition of the fact that 40% gets put into D, and 60% would go into E.

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Solution Summary

The expert calculates the portfolio for standard deviation. The correlation between the functions are provided.

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Hello!

Let's call Ra to the return of stock A, Rb to the return of stock B, 'a' to the fraction of the portfolio that corresponds to stock A (for example, 0.3 if it is 30%) and 'b' to the fraction of the portfolio that corresponds to stock B. The formula for the ...

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