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Which is the best measure of risk for a single asset held in isolation (Stand Alone Investment), and which is the best measure for an asset held in a diversified portfolio
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38 votes
38 votes
Which is the best measure of risk for a single asset held in isolation (Stand Alone Investment), and which is the best measure for an asset held in a diversified portfolio

User Vorathep Sumetphong
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1 Answer

15 votes
15 votes

Answer:

  • Single asset = Coefficient of Variation
  • Portfolio = Beta

Step-by-step explanation:

When dealing with standalone risk, coefficient of variation is best because it shows the amount by which the asset's returns might deviate from the average returns of the market.

As for portfolio assets that are well diversified, the best measure would be beta because diversified portfolios deal with systematic risk and beta shows the movement of the portfolio in relation to the market and so will show that systematic risk.

User Noaman Akram
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