This calculator helps financial analysts and investors determine the standard deviation of a portfolio, providing insights into investment risk and volatility.
All calculations are strictly based on the formulas and data provided by authoritative financial sources.
Standard Deviation of a Portfolio: \(\sigma_p = \sqrt{\sum (w_i^2 \cdot \sigma_i^2) + \sum \sum (w_i \cdot w_j \cdot \sigma_i \cdot \sigma_j \cdot \rho_{ij})}\)
Suppose you have a portfolio of two stocks with returns of 5% and 7%, weights of 50% each, and a correlation of 0.8. Using the formula, you can compute the portfolio's standard deviation.
Standard deviation is a measure of the dispersion of returns for a given security or market index. It's used by investors to gauge the amount of expected volatility.
It helps investors understand the risk involved in holding a particular portfolio.
By diversifying the portfolio and selecting assets with low correlation to each other.
This depends on the investor's risk tolerance and the market conditions.
Higher correlation between assets increases the portfolio's standard deviation.