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A high Standard Deviation may be a measure of volatility, but it does not necessarily mean that such a fund is worse than one with a low Standard Deviation.read more in a portfolio reduces the risk of the portfolio, in general, reduces it is however not necessary all the time that equally weighted portfolio provides the least risk among the universe. Fixed assets, equity (equity investments, equity-linked savings schemes), real estate, commodities (gold, silver, bronze), cash and cash equivalents, derivatives (equity, bonds, debt), and alternative investments such as hedge funds and bitcoins are examples.
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As the correlation of the two asset classes Asset Classes Assets are classified into various classes based on their type, purpose, or the basis of return or markets.The standard deviation of the portfolio can be impacted by the correlation and the weights of the stocks of the portfolio. It is widely used and practiced in the industry. Standard deviation is helpful is analyzing the overall risk and return a matrix of the portfolio and being historically helpful.This type of calculation is frequently being used by portfolio managers to calculate the risk and return of the portfolio. The calculation of standard deviation will be – So, the calculation of variance will be – Use the following data for the calculation of the standard deviation. In other words, they are measures of variability. The variance and the closely-related standard deviation are measures of how spread out a distribution is.read more in its portfolio or mutual funds for that matter in order to diversify the risk of the portfolio and its standard deviation and variance. They also pay a good dividend and return, and it is the safest option to invest. A more risk-averse investor may not be comfortable with his standard deviation and would want to add in safer investment such government bonds or large-cap stocks Large-cap Stocks Large-cap stocks refer to stocks of large companies with value, also known as the market capitalization of 10 billion dollars or more, and these stocks are less risky than others and are stable.A risk-averse investor will only be willing to take any additional risk if he or she is compensated by an equal or a larger amount of return in order to take that particular risk.read more signifies the there is a large variance in a given number of stocks in a particular portfolio, whereas, on the other hand, a low standard deviation signifies a less variance of stock among themselves.
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#Variance of weighted standard deviation how to#
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The formula of standard deviation is given below But if it is larger then data points spreads far from the mean. If it is smaller then the data points lies close to the mean value, thus shows reliability. Standard Deviation (SD) is a popular statistical tool that is represented by the Greek letter ‘σ’ and is used to measure the amount of variation or dispersion of a set of data values relative to its mean (average), thus interpret the reliability of the data.