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Homework answers / question archive / Stock G has a standard deviation of 34 percent per year and stock H has a standard deviation of 19 percent per year
Stock G has a standard deviation of 34 percent per year and stock H has a standard deviation of 19 percent per year. The correlation between stock G and stock H is .50. You have a portfolio of these two stocks wherein stock H has a portfolio weight of 80 percent. What is your portfolio variance?
0.04520
0.02337
0.04123
0.03301
0.03806
Variance of Portfolio = (w1)²(S1)² + (w2)²(S2)² + 2(w1)(w2)(S1)(S2)(correlation)
Variance of Portfolio = [(0.20)²(0.34)² + (0.80)²(0.19)² + 2(0.20)(0.80)(0.34)(0.19)(0.50)]
Variance of Portfolio = 0.03806
