Type the Excel formula for a two-asset portfolio’s standard deviation, with the weights in B1 and B2, the standard deviations in C1 and C2, and the correlation in D1.
Type the Excel formula for a two-asset portfolio’s standard deviation, with the weights in B1 and B2, the standard deviations in C1 and C2, and the correlation in D1.
Answer
=SQRT(B1^2*C1^2+B2^2*C2^2+2*B1*B2*C1*C2*D1)
0.6, 0.4, 0.18, 0.12, ρ = 0.3 → 0.130684. Set D1 = 1 and the result is the weighted average 0.156; set D1 = −1 and it is 0.06.
OpenStax Principles of Finance §15.2 — two-stock shape, reference only; Bigel, Introduction to Financial Analysis (CC BY 4.0) §14.16 — the risk note; original companies and figures