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#reading-9-probability-concepts
To calculate the variance of return on a portfolio of n assets, the inputs needed are the n expected returns on the individual assets, n variances of return on the individual assets, and n(n − 1)/2 distinct covariances.
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iable with itself is its own variance. Correlation is a number between −1 and +1 that measures the co-movement (linear association) between two random variables: ρ(R i ,R j ) = Cov(R i ,R j )/[σ(R i ) σ(R j )]. <span>To calculate the variance of return on a portfolio of n assets, the inputs needed are the n expected returns on the individual assets, n variances of return on the individual assets, and n(n − 1)/2 distinct covariances. Portfolio variance of return is σ2(Rp)=n∑i=1n∑j=1wiwjCov(Ri,Rj)σ2(Rp)=∑i=1n∑j=1nwiwjCov(Ri,Rj) . The calculation of covariance in a forward-looking sense


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