Weighted standard deviation on financial calculator

The less than perfect correlation has reduced the standard deviation from 15% to 13.6% which indicates a reduction in risk: the benefit of diversification. The portfolio standard deviation is 13.6%. The portfolio standard deviation after consideration of correlation: S BB = standard deviation of Bits & Bytes S BG = standard deviation of Black Gold and We can illustrate the fact that diversification indeed reduces the risk level by finding the weighted average standard deviation of the investments and then finding the portfolio standard deviation after taking into account the correlation between the two investments. Okoso requested you to calculate for him the extent to which the risk was reduced by the strategy. He started a portfolio with $2,000, invested 50% in Black Gold Inc., an energy company, and 50% in Bits and Bytes, an information technology firm.ДЇollowing statistics relate to these two investments:Д¬orrelation coefficient between returns of BG & B&B is 0.6. In a finance article published in a magazine in those days, he read that the not-all-eggs-in-one-basket approach to investing is useful because it helps reduce risk. A year back he started following the stocks. Multi-Asset Portfolio SD Calculator: Asset ОЎ CA = correlation coefficient between returns on asset C and asset A. ОЎ BC = correlation coefficient between returns on asset B and asset C. The least-squares regression equation (regression line) of the form y m x + b is also. For all but the weighted PearsonвЂ™s coefficient, it will also produce the z score, p-value, and confidence intervals (two-sided bounds and one-sided bounds). ОЎ AB = correlation coefficient between returns on asset A and asset B. The selected coefficient and sample size will be output by the coefficient correlation calculator. О© B = weight of asset B in the portfolio ОЈ P = is the portfolio standard deviation deviation, mean, weighted mean Linear regression Forecasting, correlation coefficient Total, x, x2, y, y2, xy +, -, x. ОЈ P = (w A 2Пѓ A 2 + w B 2 Пѓ B 2 + w C 2Пѓ C 2 + 2w Aw BПѓ AПѓ BПЃ AB + 2w Bw CПѓ BПѓ CПЃ BC + 2w Aw CПѓ AПѓ CПЃ AC) 1/2 Portfolio standard deviation for a two-asset portfolio is given by the following formula: Owing to the diversification benefits, standard deviation of a portfolio of investments (stocks, projects, etc.) should be lower than the weighted average of the standard deviations of the individual investments. One of the most basic principles of finance is that diversification leads to a reduction in risk unless there is a perfect correlation between the returns on the portfolio investments. It is a measure of total risk of the portfolio and an important input in calculation of Sharpe ratio. Portfolio standard deviation is the standard deviation of a portfolio of investments.

Weighted standard deviation on financial calculator