Question

g arbor systems and glencore stocks both have a volatility of 40%. compute the volatility of a portfolio with 50% invested in each stock if the correlation

Answer 1

Answer: volatility Portfolio = 32.86%

Step-by-step explanation:

The question is incomplete we need the value of correlation is missing. we will assume a correlation of 0.35.

W1 = 50% weight of investment in garbor stock

W2 = 50% weight of investment in Glencore stock

Standard deviation garbor = 40%

Standard deviation Glencore stock = 40%

Volatility ^2= (W1)^2(Sd2)^2 + (W2)^2(Sd2)^2 - 2W1W2 x Sd1Sd2 x p

Volatility^2 = (0.5)^2(0.40)^2 + (0.5)(0.40)^2 - 2(0.5)(0.5) x(0.4)(0.4)(0.35)

Volatility^2 = 0.04 + 0.04 + 0.028 = 0.108

volatility =
`√(0.108)` = 0.3286335345

volatility = 32.86%