# Variance of 2 Asset Portfolio Question

I am confused with a calculation with finding the variance of a 2 asset portfolio return (asset a and b) from the Schweser material.

Part of the formula says o^2 (Ra) - with o representing standard deviation and Ra representing the expected return of asset A.

Yet, when I look at examples of this formula being used, it appears this term (listed above) is being substituted for the Variance of Ra. I dont understand how these two terms are equal/substitutable. Thanks in advance

Var(A;B) = wA * Var(A) + wB * Var(B) + 2 * wa * wB * Std(A) * Std(B) * Corr(A;B)

with

Cov(A;B) = Std(A)*Std(B)*Corr(A;B)

So you could also write:

Var(A;B) = wA * Var(A) + wB * Var(B) + 2 * wa * wB * Cov(A;B)

The first and the last formula are interchangeable.

I think σ^2 (Ra) means the variance of asset a; are you interpreting it as σ^2 times Ra?

The weights go squared for the variances, so it would be: wA^2 and wB^2

Firstly my tip is to look at the formula in the curricullum whenever you are unseure or something in schweser does not make sense.

o^2 = variance

So it does not matter whether you write o^2 or variance, as long as its:

W = weight

V = variance

Covab = covariance

(Wa^2 x Va) + (Wb^2 x Vb) + (2 x Wa x Wb x Covab)
The passage discusses the formula for calculating the variance of a two-asset portfolio and addresses a confusion about the notation used in the formula. It provides explanations and clarifications on the terms and their equivalences.
no_question

the text does not contain a specific mathematical question that requires solving or a direct answer. instead, it provides explanations and clarifications about the formula for the variance of a two-asset portfolio.
Given a text passage, determine:
    1. If it contains a mathematical question (including word problems or calculations)
    2. If an answer to that mathematical question is provided in the text

First, describe the content structure you found in 1-2 sentences.

Then provide your analysis in the following format:
TYPE: <one of the following values>
- NO_QUESTION
- SINGLE_QUESTION
- SINGLE_QUESTION_WITH_ANSWER
- MULTIPLE_QUESTIONS
- MULTIPLE_QUESTIONS_WITH_ANSWERS
system
# Variance of 2 Asset Portfolio Question

I am confused with a calculation with finding the variance of a 2 asset portfolio return (asset a and b) from the Schweser material.

Part of the formula says o^2 (Ra) - with o representing standard deviation and Ra representing the expected return of asset A.

Yet, when I look at examples of this formula being used, it appears this term (listed above) is being substituted for the Variance of Ra. I dont understand how these two terms are equal/substitutable. Thanks in advance

Var(A;B) = wA * Var(A) + wB * Var(B) + 2 * wa * wB * Std(A) * Std(B) * Corr(A;B)

with

Cov(A;B) = Std(A)*Std(B)*Corr(A;B)

So you could also write:

Var(A;B) = wA * Var(A) + wB * Var(B) + 2 * wa * wB * Cov(A;B)

The first and the last formula are interchangeable.

I think σ^2 (Ra) means the variance of asset a; are you interpreting it as σ^2 times Ra?

The weights go squared for the variances, so it would be: wA^2 and wB^2

Firstly my tip is to look at the formula in the curricullum whenever you are unseure or something in schweser does not make sense.

o^2 = variance

So it does not matter whether you write o^2 or variance, as long as its:

W = weight

V = variance

Covab = covariance

(Wa^2 x Va) + (Wb^2 x Vb) + (2 x Wa x Wb x Covab)
user
The passage discusses the formula for calculating the variance of a two-asset portfolio and addresses a confusion about the notation used in the formula. It provides explanations and clarifications on the terms and their equivalences.

TYPE: NO_QUESTION

The text does not contain a specific mathematical question that requires solving or a direct answer. Instead, it provides explanations and clarifications about the formula for the variance of a two-asset portfolio.