Std Deviation Portfolio Formula. With a weighted portfolio standard deviation of 10 48 you can expect your return to be 10 points higher or lower than the average when you hold these two investments. The standard deviation formula in excel has below mentioned arguments.
Standard deviation of portfolio. σ p w a 2 σ a 2 w b 2 σ b 2 w c 2 σ c 2 2w a w b σ a σ b ρ ab 2w b w c σ b σ c ρ bc 2w a w c σ a σ c ρ ac 1 2. Wheres k a s k b s k c are standard deviation of stock a b and c respectively in the portfolio.
Where σ p is the portfolio standard deviation.
Calculate and interpret portfolio standard deviation. The standard deviation formula in excel has below mentioned arguments. Standard deviation of a two asset portfolio in general as the correlation reduces the risk of the portfolio reduces due to the diversification benefits. Portfolio variance 0 8 0 16 0 2 0 25 2 0 8 0 2 0 16 0 25 0 6 then we use the square root of the variance to get the standard deviation.
