If the covariance between two investments is zero,the variance of the sum of the two investments will be equal to the sum of the variances of the investments.

Question

Quizplus · Accepted Answer

If the covariance between two investments is zero, it means that they are uncorrelated, and therefore the variance of the sum of the two investments will be equal to the sum of the variances of the investments. This is known as the variance of the sum rule.

If the Covariance Between Two Investments Is Zero,the Variance of the Sum