The variance of a portfolio comprised of many securities is primarily dependent upon the:
A)variances of the securities held within the portfolio.
B)beta of the portfolio.
C)portfolio's correlation with the market.
D)covariance between the overall portfolio and the market.
E)covariances between the individual securities.

Question

Quizplus · Accepted Answer

The variance of a portfolio is primarily influenced by the covariances between the individual securities, as it determines how the securities move in relation to each other, affecting the overall risk of the portfolio.

The Variance of a Portfolio Comprised of Many Securities Is