Portfolio Risk and Return: Part I
Free CFA Level I lesson in Portfolio Management. 18 min read, ~2,626 words.
Portfolio variance depends on correlation, not just individual volatilities. The cross-term is where diversification lives. Any correlation below +1 reduces portfolio risk below the weighted average of the component standard deviations. At, risk can be eliminated entirely with the right weights. Utility uses variance, not standard deviation, to rank portfolios...
Read the full lesson, free →
Worked examples and practice. Free with a free account, no card.
What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- portfolio risk and return part I
Browse all free CFA Level I lessons or jump into free CFA Level I practice questions.