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Portfolio Variance Calculator

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✖Asset Weight 1 refers to the proportion of the portfolio's total value that the asset represents.ⓘ Asset Weight 1 [w₁]			+10% -10%
✖Variance of Returns on Assets 1 measures the dispersion or variability of the asset's returns around its mean return.ⓘ Variance of Returns on Assets 1 [σ₁]			+10% -10%
✖Asset Weight 2 refers to the proportion of the portfolio's total value that the asset represents.ⓘ Asset Weight 2 [w₂]			+10% -10%
✖Variance of Returns on Assets 2 measures the dispersion or variability of the asset's returns around its mean return.ⓘ Variance of Returns on Assets 2 [σ₂]			+10% -10%
✖Portfolio Correlation Coefficient measures the degree to which the returns of two assets in a portfolio move together.ⓘ Portfolio Correlation Coefficient [p₁₂]			+10% -10%

✖Portfolio Variance is a measure of the dispersion or spread of returns of a portfolio of investments.ⓘ Portfolio Variance [Var_p]

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Portfolio Variance Solution

STEP 0: Pre-Calculation Summary

Formula Used

Portfolio Variance = (Asset Weight 1)^2*Variance of Returns on Assets 1^2+(Asset Weight 2)^2*Variance of Returns on Assets 2^2+2*(Asset Weight 1*Asset Weight 2*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient)
Var_p = (w₁)^2*σ₁^2+(w₂)^2*σ₂^2+2*(w₁*w₂*σ₁*σ₂*p₁₂)
This formula uses 6 Variables

Variables Used

Portfolio Variance - Portfolio Variance is a measure of the dispersion or spread of returns of a portfolio of investments.
Asset Weight 1 - Asset Weight 1 refers to the proportion of the portfolio's total value that the asset represents.
Variance of Returns on Assets 1 - Variance of Returns on Assets 1 measures the dispersion or variability of the asset's returns around its mean return.
Asset Weight 2 - Asset Weight 2 refers to the proportion of the portfolio's total value that the asset represents.
Variance of Returns on Assets 2 - Variance of Returns on Assets 2 measures the dispersion or variability of the asset's returns around its mean return.
Portfolio Correlation Coefficient - Portfolio Correlation Coefficient measures the degree to which the returns of two assets in a portfolio move together.

STEP 1: Convert Input(s) to Base Unit

Asset Weight 1: 0.4 --> No Conversion Required
Variance of Returns on Assets 1: 0.37 --> No Conversion Required
Asset Weight 2: 0.6 --> No Conversion Required
Variance of Returns on Assets 2: 0.56 --> No Conversion Required
Portfolio Correlation Coefficient: 0.108 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

Var_p = (w₁)^2*σ₁^2+(w₂)^2*σ₂^2+2*(w₁*w₂*σ₁*σ₂*p₁₂) --> (0.4)^2*0.37^2+(0.6)^2*0.56^2+2*(0.4*0.6*0.37*0.56*0.108)

Evaluating ... ...

Var_p = 0.145541248

STEP 3: Convert Result to Output's Unit

0.145541248 --> No Conversion Required

FINAL ANSWER

0.145541248 ≈ 0.145541 <-- Portfolio Variance

(Calculation completed in 00.004 seconds)

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Portfolio Variance Formula

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What is Portfolio Variance?

Portfolio Variancea measure of the dispersion or spread of returns of a portfolio of investments. It quantifies the degree of risk associated with holding a particular portfolio.
For portfolios with more than two assets, the formula extends accordingly by adding terms for each pair of assets, considering their respective weights and correlations.
Once you have calculated the portfolio variance, you can take the square root to find the standard deviation, which gives a measure of the volatility or risk of the portfolio.

How to Calculate Portfolio Variance?

Portfolio Variance calculator uses Portfolio Variance = (Asset Weight 1)^2*Variance of Returns on Assets 1^2+(Asset Weight 2)^2*Variance of Returns on Assets 2^2+2*(Asset Weight 1*Asset Weight 2*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient) to calculate the Portfolio Variance, The Portfolio Variance formula is defined as a measure of the dispersion or spread of returns of a portfolio of investments. It quantifies the degree of risk associated with holding a particular portfolio. Portfolio Variance is denoted by Var_p symbol.

How to calculate Portfolio Variance using this online calculator? To use this online calculator for Portfolio Variance, enter Asset Weight 1 (w₁), Variance of Returns on Assets 1 (σ₁), Asset Weight 2 (w₂), Variance of Returns on Assets 2 (σ₂) & Portfolio Correlation Coefficient (p₁₂) and hit the calculate button. Here is how the Portfolio Variance calculation can be explained with given input values -> 0.145541 = (0.4)^2*0.37^2+(0.6)^2*0.56^2+2*(0.4*0.6*0.37*0.56*0.108).

FAQ

What is Portfolio Variance?

The Portfolio Variance formula is defined as a measure of the dispersion or spread of returns of a portfolio of investments. It quantifies the degree of risk associated with holding a particular portfolio and is represented as Var_p = (w₁)^2*σ₁^2+(w₂)^2*σ₂^2+2*(w₁*w₂*σ₁*σ₂*p₁₂) or Portfolio Variance = (Asset Weight 1)^2*Variance of Returns on Assets 1^2+(Asset Weight 2)^2*Variance of Returns on Assets 2^2+2*(Asset Weight 1*Asset Weight 2*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient). Asset Weight 1 refers to the proportion of the portfolio's total value that the asset represents, Variance of Returns on Assets 1 measures the dispersion or variability of the asset's returns around its mean return, Asset Weight 2 refers to the proportion of the portfolio's total value that the asset represents, Variance of Returns on Assets 2 measures the dispersion or variability of the asset's returns around its mean return & Portfolio Correlation Coefficient measures the degree to which the returns of two assets in a portfolio move together.

How to calculate Portfolio Variance?

The Portfolio Variance formula is defined as a measure of the dispersion or spread of returns of a portfolio of investments. It quantifies the degree of risk associated with holding a particular portfolio is calculated using Portfolio Variance = (Asset Weight 1)^2*Variance of Returns on Assets 1^2+(Asset Weight 2)^2*Variance of Returns on Assets 2^2+2*(Asset Weight 1*Asset Weight 2*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient). To calculate Portfolio Variance, you need Asset Weight 1 (w₁), Variance of Returns on Assets 1 (σ₁), Asset Weight 2 (w₂), Variance of Returns on Assets 2 (σ₂) & Portfolio Correlation Coefficient (p₁₂). With our tool, you need to enter the respective value for Asset Weight 1, Variance of Returns on Assets 1, Asset Weight 2, Variance of Returns on Assets 2 & Portfolio Correlation Coefficient and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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