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# Errors Found in Study Materials P2.T9. Investment Management (OLD thread)

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#### emilioalzamora1

##### Well-Known Member
Hi @Bernardo,

your statement is partially correct: In the case of correlation coefficient = 0, then the portfolio std dev (sigma p) gets to zero the larger N (no of securities), however, as you can see the correlation coefficient is the critical point here in the portfolio std dev equation.

In any case where correl coefficient, rho (ρ) is greater than 0, portfolio std dev is positive (greater than zero).

In the case of perfect positive corre (rho = 1), portfolio std dev equals the std. deviation of the securities (sigma)

1.) example: N = 50, sigma = 0,14, rho = 1

sigma(p) = 0,14 * sqrt [1/50 + (1-1/50)*1] = 0,14

2.) example: N = 200, sigma = 0,21, rho = 1

sigma(p) = 0,21 * sqrt [1/200 + (1-1/200)*1] = 0,21

1.1) example 1.) example: N = 50, sigma = 0,14, rho = 0.2

sigma(p) = 0,14 * sqrt [1/50 + (1-1/50)*0.2] = 0,14 = 0.065

>>> The smaller rho becomes, the smaller the portfolio std dev.

And yes, portfolio std dev. is the product between the individual securities sigma and the term on the right-hand side involving the no. of assets (n) and rho.

In addition, I have posted this over one year ago in the forum. Perhaps it is helpful:

https://www.bionicturtle.com/forum/...ariance-for-the-entire-stock-portfolio.10153/

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#### David Harper CFA FRM

##### David Harper CFA FRM
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Hi @Bernardo Yes, absolutely. You are correct, it is our mistake. Apologies. It should read exactly as you show, we will get this fixed. Thank you! (cc @Nicole Seaman )

#### Bernardo

##### New Member
Many thanks for the confirmation, David!

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#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
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Yes, agreed @Merlinius Apologies, but thank you for the attention to detail. @Nicole Seaman This formula (i.e., 14.10 in the source) should be as Merlinius shows it: with a dot/bullet operator instead of the second subtraction. Thank you!

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