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  • Portfolio Risk Example

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    Sagar Kansal
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    The document contains tables and charts showing the risk and expected return of portfolios with varying allocations to two assets - one with a risk (standard deviation) of 13% and return of 20%, the other with risk of 8% and return of 12%. It analyzes how portfolio risk and expected return change as the weight of the higher risk/return asset increases from 0-100%, and how it is also affected with the correlation between the two assets varying from -1 to +1.

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    Portfolio risk example

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    The document contains tables and charts showing the risk and expected return of portfolios with varying allocations to two assets - one with a risk (standard deviation) of 13% and return of 20%, the other with risk of 8% and return of 12%. It analyzes how portfolio risk and expected return change as the weight of the higher risk/return asset increases from 0-100%, and how it is also affected with the correlation between the two assets varying from -1 to +1.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    13 views4 pages

    Portfolio Risk Example

    Uploaded by

    Sagar Kansal
    The document contains tables and charts showing the risk and expected return of portfolios with varying allocations to two assets - one with a risk (standard deviation) of 13% and return of 20%, the other with risk of 8% and return of 12%. It analyzes how portfolio risk and expected return change as the weight of the higher risk/return asset increases from 0-100%, and how it is also affected with the correlation between the two assets varying from -1 to +1.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 4

    RE 13% sE 20%

    RD 8% sD 12%

    Portfolio risk sp
    wD wE E(rP) r = 0.3 r = -1 r=0 r=+1
    100% 0.00% 8.00% 12.0% 12.0% 12.0% 12.0%
    90% 10.00% 8.50% 11.6% 8.8% 11.0% 12.8%
    80% 20.00% 9.00% 11.5% 5.6% 10.4% 13.6%
    70% 30.00% 9.50% 11.7% 2.4% 10.3% 14.4%
    62.5% 37.50% 9.88% 12.1% 0.0% 10.6% 15.0%
    60% 40.00% 10.00% 12.3% 0.8% 10.8% 15.2%
    50% 50.00% 10.50% 13.1% 4.0% 11.7% 16.0%
    40% 60.00% 11.00% 14.2% 7.2% 12.9% 16.8%
    30% 70.00% 11.50% 15.5% 10.4% 14.5% 17.6%
    20% 80.00% 12.00% 16.9% 13.6% 16.2% 18.4%
    10% 90.00% 12.50% 18.4% 16.8% 18.0% 19.2%
    0% 100.00% 13.00% 20.0% 20.0% 20.0% 20.0%

    Portfolio risk sp
    wE r = -1 r=+1 r=0 r = 0.3
    0.0% 12.0% 12.0% 12.0% 12.0%
    10.0% 8.8% 12.8% 11.0% 11.6%
    20.0% 5.6% 13.6% 10.4% 11.5%
    30.0% 2.4% 14.4% 10.3% 11.7%
    37.5% 0.0% 15.0% 10.6% 12.1%
    40.0% 0.8% 15.2% 10.8% 12.3%
    50.0% 4.0% 16.0% 11.7% 13.1%
    60.0% 7.2% 16.8% 12.9% 14.2%
    70.0% 10.4% 17.6% 14.5% 15.5%
    80.0% 13.6% 18.4% 16.2% 16.9%
    90.0% 16.8% 19.2% 18.0% 18.4%
    100.0% 20.0% 20.0% 20.0% 20.0%

    Return
    8.0% 12.0% 12.0% 12.0% 12.0%
    8.5% 8.8% 11.0% 11.6% 12.8%
    9.0% 5.6% 10.4% 11.5% 13.6%
    9.5% 2.4% 10.3% 11.7% 14.4%
    9.9% 0.0% 10.6% 12.1% 15.0%
    10.0% 0.8% 10.8% 12.3% 15.2%
    10.5% 4.0% 11.7% 13.1% 16.0%
    11.0% 7.2% 12.9% 14.2% 16.8%
    11.5% 10.4% 14.5% 15.5% 17.6%
    12.0% 13.6% 16.2% 16.9% 18.4%
    12.5% 16.8% 18.0% 18.4% 19.2%
    13.0% 20.0% 20.0% 20.0% 20.0%
    Portfolio risk
    Correl = -1 Correl = +1 Correl = 0 Correl = 0.3
    20.0%
    18.0%
    16.0%
    14.0%
    12.0%
    Portfolio risk

    10.0%
    8.0%
    6.0%
    4.0%
    2.0%
    0.0%
    0% .0
    %
    .0
    %
    .0
    % 0% 0% 0% 0% 0% 0% 0%
    0. 10 20 Weight
    30 0.
    4of 50. 60. 70. 80. 90. 00.
    equity in portfolio 1

    Portfolio risk return


    Correl = -1 Correl = 0 Correl = 0.3 Correl = +1
    P o r tf o lio r e tu r n s

    Portfolio risk
    Portfolio risk return
    Correl = -1 Correl = 0 Correl = 0.3 Correl = +1

    P o r tf o lio r e tu r n s
    Portfolio risk

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