Portfolio Management Explained: Calculating Risk, Return & Diversification (Tamil/English) Day 02

Описание: Video Overview: In this lecture, we dive deep into the fundamentals of Portfolio Management, exploring the critical relationship between Risk and Return. We move beyond simple individual stock analysis to understand how combining assets can optimize your investment strategy. Whether you are a student of Financial Management or an investor looking to understand the math behind the market, this video breaks down complex formulas into understandable concepts.
Key Topics Covered in This Video:
1. Historical vs. Expected Return: We start by reviewing how to measure return using historical price movements and how to forecast future returns based on probability and economic conditions. We analyze how different stocks (A, B, C) perform under various economic scenarios, from "Recession" to "Boom".
2. Risk Measures & The Risk-Free Asset: Learn how to calculate Risk using Standard Deviation and Variance. We examine the unique properties of Treasury Bills, which act as "Risk-Free Assets" with zero variance because they are government-backed. We also introduce the Risk Premium—the reward investors demand for taking on additional risk over the risk-free rate.
3. The Coefficient of Variation (CV): How do you compare stocks with different returns and risk levels? We introduce the Coefficient of Variation, a crucial metric that helps investors determine the amount of risk taken for every unit of return.
4. Portfolio Construction & Diversification: Using the classic analogy of "not putting all your eggs in one basket," we explain the concept of diversification. We demonstrate how to calculate the Expected Return of a Portfolio using weighted averages.
5. Portfolio Risk & Correlation (The "Shortcut" Formula): The video explains why Portfolio Risk is not simply the weighted average of individual risks. We perform detailed calculations using Covariance and Correlation to determine the true risk of a portfolio.
6. The Power of Negative Correlation: We answer the difficult question: Should you invest in "Stock B" even if it has lower returns?. We discover how assets with negative correlation (moving opposite to the economy) can actually reduce the overall risk of your portfolio, making them essential for smart diversification.
Formulas Explained:
• Expected Return
• Standard Deviation
• Coefficient of Variation (CV)
• Portfolio Return (Weighted Average)
• Portfolio Variance (using Correlation/Covariance)
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