You have collected the following information for the returns of the Elm Corporation and the Maple Corporation: The covariance of the returns of the two securities is 277.2%%.
-Refer to the information above. If you invest 40% of your money in Elm and 60% in Maple, what is the standard deviation of the returns on your portfolio?

Question

You have collected the following information for the returns of the Elm Corporation and the Maple Corporation:  The covariance of the returns of the two securities is 277.2%%.
-Refer to the information above. If you invest 40% of your money in Elm and 60% in Maple, what is the standard deviation of the returns on your portfolio?

Quizplus · Accepted Answer

The standard deviation of the portfolio is the weighted average of the standard deviations of the individual assets, where the weights are the proportions of the portfolio invested in each asset. In this case, the standard deviation of the portfolio is:(0.4 * 15%) + (0.6 * 12%) = 18.95%

You Have Collected the Following Information for the Returns of the Elm