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Homework answers / question archive / Using the data in the following table, and the fact that the correlation of A and B is 0
Using the data in the following table, and the fact that the correlation of A and B is 0.46, calculate the volatility (standard deviation) of a portfolio that is 80% invested in stock A and 20% invested in stock B. (Click on the following icon in order to copy its contents into a spreadsheet.) Realized Returns Year Stock A Stock B 2008 29% 2009 10% 21% 2010 9% 8% 2011 -8% - 10% 2012 5% - 13% 2013 13% 33% - 2% The standard deviation of the portfolio is % (Round to two decimal places.)
| A | B | 0.8*A + 0.2*B |
| -2% | 29% | 4.20% |
| 10% | 21% | 12.20% |
| 9% | 8% | 8.80% |
| -8% | -10% | -8.40% |
| 5% | -13% | 1.40% |
| 13% | 33% | 17.00% |
use stdev function in Excel
standard dev of portfolio = 8.93%
