Portfolio Variance and Standard Deviation

The video tutorial explains how to calculate the variance and standard deviation of a portfolio consisting of two shares, A and B, with given investments and standard deviations. It covers the calculation of weights for each share, the impact of correlation on the portfolio, and how changes in correlation affect risk. The tutorial emphasizes the importance of understanding these concepts to manage investment risk effectively.

What is the total amount invested in shares A and B?

• $300

• $200

• $500

• $700

What is the standard deviation of share A?

• 3%

• 10%

• 7%

• 5%

What is the correlation between shares A and B?

• 0.5

• 0.7

• 0.3

• 0.1

What is the weighting of share A in the portfolio?

• 0.4

• 0.2

• 0.8

• 0.6

How can the weighting of share B be calculated?

• 1 - 0.2

• 1 - 0.8

• 1 - 0.6

• 1 - 0.4

What is the standard deviation of share B?

• 0.05

• 0.03

• 0.07

• 0.09

Which of the following is used in the variance calculation of the portfolio?

• Weightings only

• Standard deviations only

• Weightings, standard deviations, and correlation

• Correlation only

What is the variance of the portfolio?

• 0.004

• 0.0021

• 0.001

• 0.003

How is the standard deviation of the portfolio derived from the variance?

• By multiplying by 2

• By taking the square root

• By adding 1

• By dividing by 2

What is the standard deviation of the portfolio?

• 6.34%

• 4.68%

• 3.44%

• 5.12%