Find the expected value and standard deviation of the returns for the following portfolio
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Suppose you want a portfolio composed of AT&T, Cigna, Disney, and Ford. Find the expected value and standard deviation of the returns for the following portfolio
I know that I have to use 
however, how would I find the covariance eg (COV(Ri, Rj)) without knowing the correlation coefficient?
I found the expected value by
0.3*0.00717 + 0.2*0.01327 + 0.4*0.00562 + 0.1*0.01555 = 0.007716.
How would the covariance be found in order to calculate the variance V(Rp)?
The answer below was given to me however, it was not explained on how the values were calculated.
Does anybody know how the values of the covariance came about? Also why does the covariance get multiplied by the respective standard deviation values from the calculation above?
probability variance standard-deviation bivariate-distributions
asked Dec 9 '18 at 22:19
WadeWade
188211
$endgroup$
add a comment |
$begingroup$
Suppose you want a portfolio composed of AT&T, Cigna, Disney, and Ford. Find the expected value and standard deviation of the returns for the following portfolio
I know that I have to use
however, how would I find the covariance eg (COV(Ri, Rj)) without knowing the correlation coefficient?
I found the expected value by
0.3*0.00717 + 0.2*0.01327 + 0.4*0.00562 + 0.1*0.01555 = 0.007716.
How would the covariance be found in order to calculate the variance V(Rp)?
The answer below was given to me however, it was not explained on how the values were calculated.
Does anybody know how the values of the covariance came about? Also why does the covariance get multiplied by the respective standard deviation values from the calculation above?
probability variance standard-deviation bivariate-distributions
asked Dec 9 '18 at 22:19
WadeWade
188211
$endgroup$
$begingroup$
Indeed the problem is missing information. You either need the covariance of the returns or the correlation coefficient to continue. Not sure what else you could do without either.
$endgroup$
– LoveTooNap29
Dec 9 '18 at 22:23
$begingroup$
The table you posted are the lower half of the variance covariance matrix. So you can read all the variance from the diagonal entries and covariance from the off-diagonal entries. Then just plug-in the numbers into the formula. You just take square root of the variance to obtain the standard deviation
$endgroup$
– BGM
Dec 10 '18 at 8:05
add a comment |
$begingroup$
Suppose you want a portfolio composed of AT&T, Cigna, Disney, and Ford. Find the expected value and standard deviation of the returns for the following portfolio
I know that I have to use
however, how would I find the covariance eg (COV(Ri, Rj)) without knowing the correlation coefficient?
I found the expected value by
0.3*0.00717 + 0.2*0.01327 + 0.4*0.00562 + 0.1*0.01555 = 0.007716.
How would the covariance be found in order to calculate the variance V(Rp)?
The answer below was given to me however, it was not explained on how the values were calculated.
Does anybody know how the values of the covariance came about? Also why does the covariance get multiplied by the respective standard deviation values from the calculation above?
probability variance standard-deviation bivariate-distributions
asked Dec 9 '18 at 22:19
WadeWade
188211
$endgroup$
Suppose you want a portfolio composed of AT&T, Cigna, Disney, and Ford. Find the expected value and standard deviation of the returns for the following portfolio
I know that I have to use
however, how would I find the covariance eg (COV(Ri, Rj)) without knowing the correlation coefficient?
I found the expected value by
0.3*0.00717 + 0.2*0.01327 + 0.4*0.00562 + 0.1*0.01555 = 0.007716.
How would the covariance be found in order to calculate the variance V(Rp)?
The answer below was given to me however, it was not explained on how the values were calculated.
Does anybody know how the values of the covariance came about? Also why does the covariance get multiplied by the respective standard deviation values from the calculation above?
probability variance standard-deviation bivariate-distributions
probability variance standard-deviation bivariate-distributions
asked Dec 9 '18 at 22:19
WadeWade
188211
asked Dec 9 '18 at 22:19
WadeWade
188211
edited Dec 9 '18 at 22:38
Wade
asked Dec 9 '18 at 22:19
WadeWade
188211
asked Dec 9 '18 at 22:19
WadeWade
188211
asked Dec 9 '18 at 22:19
WadeWade
188211
188211
$begingroup$
Indeed the problem is missing information. You either need the covariance of the returns or the correlation coefficient to continue. Not sure what else you could do without either.
$endgroup$
– LoveTooNap29
Dec 9 '18 at 22:23
$begingroup$
The table you posted are the lower half of the variance covariance matrix. So you can read all the variance from the diagonal entries and covariance from the off-diagonal entries. Then just plug-in the numbers into the formula. You just take square root of the variance to obtain the standard deviation
$endgroup$
– BGM
Dec 10 '18 at 8:05
add a comment |
$begingroup$
Indeed the problem is missing information. You either need the covariance of the returns or the correlation coefficient to continue. Not sure what else you could do without either.
$endgroup$
– LoveTooNap29
Dec 9 '18 at 22:23
$begingroup$
The table you posted are the lower half of the variance covariance matrix. So you can read all the variance from the diagonal entries and covariance from the off-diagonal entries. Then just plug-in the numbers into the formula. You just take square root of the variance to obtain the standard deviation
$endgroup$
– BGM
Dec 10 '18 at 8:05
$begingroup$
Indeed the problem is missing information. You either need the covariance of the returns or the correlation coefficient to continue. Not sure what else you could do without either.
$endgroup$
– LoveTooNap29
Dec 9 '18 at 22:23
$begingroup$
Indeed the problem is missing information. You either need the covariance of the returns or the correlation coefficient to continue. Not sure what else you could do without either.
$endgroup$
– LoveTooNap29
Dec 9 '18 at 22:23
$begingroup$
The table you posted are the lower half of the variance covariance matrix. So you can read all the variance from the diagonal entries and covariance from the off-diagonal entries. Then just plug-in the numbers into the formula. You just take square root of the variance to obtain the standard deviation
$endgroup$
– BGM
Dec 10 '18 at 8:05
$begingroup$
The table you posted are the lower half of the variance covariance matrix. So you can read all the variance from the diagonal entries and covariance from the off-diagonal entries. Then just plug-in the numbers into the formula. You just take square root of the variance to obtain the standard deviation
$endgroup$
– BGM
Dec 10 '18 at 8:05
add a comment |
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$begingroup$
Indeed the problem is missing information. You either need the covariance of the returns or the correlation coefficient to continue. Not sure what else you could do without either.
$endgroup$
– LoveTooNap29
Dec 9 '18 at 22:23
$begingroup$
The table you posted are the lower half of the variance covariance matrix. So you can read all the variance from the diagonal entries and covariance from the off-diagonal entries. Then just plug-in the numbers into the formula. You just take square root of the variance to obtain the standard deviation
$endgroup$
– BGM
Dec 10 '18 at 8:05