Statistics, Portfolio Management, Stock Market, Modern Portfolio Theory, Standard Deviation.
were not correlated at all, i.e. ρ12 = 0. Then for the two assets, with standard deviation of 50%, the portfolio’s standard deviation was the square root of 2 divided by 4, i.e. 35%. Uncorrelated assets are good. But how about positively or negatively correlated assets? As you can see from the