Portfolio Tools

Portfolio Return Formula: (for *N* stocks, indexed 1 through *N*),

return on portfolio $= x_1 \tilde r_1 + x_2 \tilde r_2 + \ldots + x_N \tilde r_N$

Variance(r): $= \Sigma (weight)*(r_a_c_t_u_a_l - r_e_x_p_e_c_t_e_d)^2$

mean return: $= \Sigma (weight) * (return)$

correlation: $\rho (\tilde r_1, \tilde r_2) = \frac{cov(\tilde r_1, \tilde r_2)}{(\sigma_1*\sigma_2)}$

covariance: $E[(\tilde r_1 - r_1) * (\tilde r_2 - r_2)]$

page revision: 8, last edited: 09 Nov 2007 21:00