portfolio risk

Portfolio risk ,[object Object],[object Object],[object Object]

Why risk decrease when we combine two or more assets ,[object Object],[object Object],[object Object],Scenario PIA POL Averag Same oil price 10% 10% 10% Oil prices fall 20% 5% 12.5% Oil prices rise 2% 20% 11%

Interpretation ,[object Object],[object Object],[object Object],[object Object]

Why the SD fell by combining two asset? ,[object Object],[object Object],[object Object]

What is necessary for combining securities to reduce risk? ,[object Object],[object Object]

Portfolio Risk will not decrease ,[object Object],[object Object]

Why risk falls in a portfolio? ,[object Object],[object Object],[object Object],[object Object]

Risk Reduction with Diversification Number of Securities St. Deviation Market Risk Unique Risk

Co-variance ,[object Object],[object Object],[object Object],[object Object],[object Object]

Formula of covariance ,[object Object],[object Object],[object Object],[object Object]

To make covariance meaningful ,[object Object],[object Object]

Correlation Coefficient ,[object Object],[object Object],[object Object]

Calculating Portfolio Risk ,[object Object],[object Object],[object Object],[object Object],[object Object]

EXAMPLE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],Scenario PIA POL Same oil price 10% 10% Oil prices fall 20% 5% Oil prices rise 2% 20%

What if we change weights? ,[object Object],Portfolios PIA POL SD of Portfolio Return of Portfolio A 25% 75% 4.59% 11.4% B 50% 50% 3.55% 11.2% C 75% 25% 5.71% 10.9% D 100% 0 9.01% 10.67%

portfolio risk

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