Standard deviation measures how far numbers in a data set are spread out from an average value. In investing, it is used as a measurement of portfolio volatility.

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 ...