30 years: Financial markets trader
In this video, Abdulla outlines the importance of monitoring portfolio volatility risk and the way it is calculated for a two asset portfolio, and a three stock portfolio.
In this video, Abdulla outlines the importance of monitoring portfolio volatility risk and the way it is calculated for a two asset portfolio, and a three stock portfolio.
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5 mins 39 secs
Volatilities and correlations are not static, they can change, sometimes very suddenly, therefore the risk in a portfolio can change over time, or sometimes very suddenly. It’s a case of constantly monitoring the risks, even perhaps trying to anticipate those changes in advance and making appropriate adjustments.
Key learning objectives:
Learn to calculate the volatility of a two asset portfolio
Outline the formula used for a three stock portfolio
Outline the uses of portfolio volatility in risk management
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This formula involves three key components:
Stock | Holding | Price | Value | Weight | Volatility | Correlation |
A | 1000 | 100 | 100,000 | 50% | 35% | 1.00 |
B | 1000 | 100 | 100,000 | 50% | 35% |
Stock | Holding | Price | Value | Weight | Volatility | Correlation |
A | 1000 | 100 | 100,000 | 50% | 20% | 1.00 |
B | 1000 | 100 | 100,000 | 50% | 35% |
Stock | Holding | Price | Value | Weight | Volatility | Correlation |
A | 1500 | 100 | 150,000 | 60% | 20% | 1.00 |
B | 1000 | 100 | 100,000 | 40% | 35% |
Stock | Holding | Price | Value | Weight | Volatility | Correlation |
A | 1500 | 100 | 150,000 | 75% | 20% | 0 |
B | 500 | 100 | 50,000 | 25% | 35% |
Stock | Holding | Price | Value | Weight | Volatility | Correlation |
A | 1500 | 100 | 150,000 | 75% | 20% | -0.7 |
B | 500 | 100 | 50,000 | 25% | 35% |
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
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