Explore BrainMass

Explore BrainMass

    Calculating the Variance and Standard Deviation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Question: A portfolio is made up of 75% of stock 1, and 25% of stock 2. Stock 1 has a variance of .08, and stock 2 has a variance of .035. The covariance between the stocks is -.001. Calculate both the variance and the standard deviation of the portfolio.

    © BrainMass Inc. brainmass.com June 3, 2020, 6:54 pm ad1c9bdddf

    Solution Preview


    Variance or standard deviation of a stock/portfolio is an indicator of risk.

    In the given example we have
    Weight of stock 1 = w1 = 75% or 0.75
    Weight of stock 2 = w2 = ...

    Solution Summary

    In about 120 words, this solution contains calculations for variance and the standard deviation of the given portfolio. A step by step response, which includes the required equations is provided.