Portfolio Expected Return and Standard Deviation Calculation
Portfolio Expected Return Calculation:
Expected Return of the Portfolio can be calculated by considering the weights of each investment. Let's assume the weight of Chartreuse as w1 and the weight of Lavender as w2, where w1 + w2 = 1.
Portfolio Expected Return Formula:
Portfolio Expected Return = w1 * Expected Return of Chartreuse + w2 * Expected Return of Lavender
Portfolio Expected Return = w1 * 12% + w2 * 4%
By plugging in the respective values, we can calculate the expected return of the portfolio.
Portfolio Standard Deviation Calculation:
Standard Deviation of the Portfolio involves a more complex calculation that takes into account the standard deviations of each investment, their correlations, and the weights assigned to each.
Portfolio Standard Deviation Formula:
Portfolio Standard Deviation = sqrt(w1^2 * Standard Deviation of Chartreuse^2 + w2^2 * Standard Deviation of Lavender^2 + 2 * w1 * w2 * Correlation * Standard Deviation of Chartreuse * Standard Deviation of Lavender)
By substituting the values of weights, standard deviations, and correlation coefficient into the formula, we can determine the standard deviation of the portfolio.
These calculations are crucial in assessing the risk and return profile of a portfolio containing Chartreuse and Lavender investments.
To calculate the portfolio expected return and standard deviation for a portfolio consisting of Chartreuse and Lavender investments, we need to consider the weights of each investment in the portfolio. Let's assume that the weight of Chartreuse is w1 and the weight of Lavender is w2, where w1 + w2 = 1. The expected return of the portfolio is given by: Portfolio Expected Return = w1 * Expected Return of Chartreuse + w2 * Expected Return of Lavender Portfolio Expected Return = w1 * 12% + w2 * 4% The standard deviation of the portfolio is given by: Portfolio Standard Deviation = sqrt(w1^2 * Standard Deviation of Chartreuse^2 + w2^2 * Standard Deviation of Lavender^2 + 2 * w1 * w2 * Correlation * Standard Deviation of Chartreuse * Standard Deviation of Lavender) Portfolio Standard Deviation = sqrt(w1^2 * (40%)^2 + w2^2 * (25%)^2 + 2 * w1 * w2 * (-0.20) * 40% * 25%)