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How to Calculate Annualized Standard Deviation

A stock trader will generally have access to daily, weekly, monthly, or quarterly price data for a stock or a stock portfolio. Using this data he can calculate corresponding returns from the stock (daily, weekly, monthly, quarterly returns). He can use this data to calculate the standard deviation of the stock returns. The standard deviation

How to Calculate Portfolio Risk and Return

In this article, we will learn how to compute the risk and return of a portfolio of assets. Let’s start with a two asset portfolio. Portfolio Return Let’s say the returns from the two assets in the portfolio are R1 and R2. Also, assume the weights of the two assets in the portfolio are w1

Calculate Variance and Standard Deviation of an Asset

After discussing the calculation of returns on investments, let’s now learn about how to measure the risks associated with these returns. In general, the risk of an asset or a portfolio is measured in the form of the standard deviation of the returns, where standard deviation is the square root of variance. Let’s look at

Statistical Foundations: Mean and Standard Deviation

Many financial calculations and estimations require a statistical analysis of the variability of past market returns. Because we have strong evidence that market returns are approximately normally distributed, we can estimate potential market movements with a given probability using two simple parameters: mean (or average return) and standard deviation (or volatility). Mean Mean describes where

Mean, Variance, Standard Deviation and Correlation

While making an investment decision, it is important to assess the risk/return profile of any investment. The relation between risk and return raises three basic questions: How do I estimate the percentage return that I will receive on an investment? How much risk does an asset add to a portfolio? What can I do to