2 Asset Portfolio Calculator

 Posted on July 23, 2024  |  2 minutes  |  389 words  |  Christie Applegate
2 Asset Portfolio Calculator MathCelebrity logo Image to Crop Asset 1 makes up 60% of a portfolio
It has an expected return of 5%
It has volatility = 2%.

Asset 2 makes up 40% of a portfolio
It has an expected return of 4%
It has volatility = 5%.

With a covariance of -50%
calculate the expected return, variance, and standard deviation of the portfolio

Calculate expected return:

Expected Return = Asset 1% x Expected Return of Asset 1 + Asset 2% x Expected Return of Asset 2
Expected Return = 0.6 x 0.05 + 0.4 x 0.04
Expected Return = 0.03 + 0.016
Expected Return = 0.046 or 4.6

Calculate the variance of the portfolio σ2:

Portfolio Variance = Asset 2%2 x Volatility of Asset 12 + Asset 2%2 x Volatility of Asset 22 + 2 x Asset 1 % x Asset 2% x Covariance x Volatility of Asset 1 x Volatility of Asset 2
Portfolio Variance = 0.62 x 0.022 + 0.42 x 0.052 + 2 x 0.6 x 0.4 x -0.5 x 0.02 x 0.05
Portfolio Variance = 0.36 x 0.0004 + 0.16 x 0.0025 + -0.00024
Portfolio Variance = 0.000144 + 0.0004 + -0.00024
Portfolio Variance = 0.000304 or 0.0304%

Calculate the volatility σ

We want square root of the variance
σ  =  √σ2
σ  =  √0.000304

σ = 0.017435595774163 or 1.7435595774163%

What is the Answer?

σ = 0.017435595774163 or 1.7435595774163%

How does the 2 Asset Portfolio Calculator work?

Free 2 Asset Portfolio Calculator - Given a portfolio with 2 assets, this determines the expected return (mean), variance, and volatility (standard deviation) of the portfolio.
This calculator has 7 inputs.

What 1 formula is used for the 2 Asset Portfolio Calculator?

Portfolio Variance = Asset 2%2 x Volatility of Asset 12 + Asset 2%2 x Volatility of Asset 22 + 2 x Asset 1 % x Asset 2% x Covariance x Volatility of Asset 1 x Volatility of Asset 2

For more math formulas, check out our Formula Dossier

What 5 concepts are covered in the 2 Asset Portfolio Calculator?

2 asset portfolioexpected returnamount of profit or loss an investor anticipates on an investmentstandard deviationa measure of the amount of variation or dispersion of a set of values. The square root of variancevarianceHow far a set of random numbers are spead out from the meanvolatilityMeasures dispersion of returns for an stock or index 2 Asset Portfolio Calculator Video Play

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