#reading-9-probability-concepts
The calculation of covariance in a forward-looking sense requires the specification of a joint probability function, which gives the probability of joint occurrences of values of the two random variables.
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Summary ns 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) .
<span>The calculation of covariance in a forward-looking sense requires the specification of a joint probability function, which gives the probability of joint occurrences of values of the two random variables.
When two random variables are independent, the joint probability function is the product of the individual probability functions of the random variables.
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