Standard deviation assumes normal distribution ... applied to the two series of daily values for the two stocks. The portfolio variance formula is: (W1^2)(SD1^2)+(W2^2)(SD2^2)+(2xW1xW2xC12).

This is the formula: The excess return of the portfolio over the risk-free rate is standardized by the standard deviation of the excess of the portfolio return. How It Works Hypothetically ...

Finally, you divide the difference of those two components by the standard deviation of the portfolio's excess return. Here's what the equation looks like: Return of portfolio: This is what your ...