Portfolio Standard Deviation - Meaning, Formula, Examples, How to Calculate?

Описание: In this video on Portfolio Standard Deviation, here we discuss its definition and learn how to calculate the standard deviation of the portfolio (three assets).

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐒𝐭𝐚𝐧𝐝𝐚𝐫𝐝 𝐃𝐞𝐯𝐢𝐚𝐭𝐢𝐨𝐧?
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Portfolio Standard deviation is the standard deviation of rate of return on an investment portfolio and is used to evaluate an investment's intrinsic volatility

𝐈𝐧𝐭𝐞𝐫𝐩𝐫𝐞𝐭𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐒𝐭𝐚𝐧𝐝𝐚𝐫𝐝 𝐃𝐞𝐯𝐢𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨
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#1 - A high standard deviation from the portfolio shows the high risk from the portfolio and the return is more volatile in nature as well as unstable.

#2 - A small standard deviation portfolio means less volatility and more stability in portfolio yields and is a very helpful economic metric when comparing various portfolios.

𝐒𝐭𝐞𝐩𝐬 𝐭𝐨 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐞 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐒𝐭𝐚𝐧𝐝𝐚𝐫𝐝 𝐃𝐞𝐯𝐢𝐚𝐭𝐢𝐨𝐧
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Step 1 - Find the standard deviation in the portfolio for each asset.

Step 2 - Find the weight of each asset in the overall Portfolio.

Step 3 - Find the correlation between the Portfolio's assets.

Step 4 - Apply the values in the above-mentioned to derive the standard deviation formula of a two Asset Portfolio.

To know more about the 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐒𝐭𝐚𝐧𝐝𝐚𝐫𝐝 𝐃𝐞𝐯𝐢𝐚𝐭𝐢𝐨𝐧, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/portfo...

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