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Find covariance with the whole portfolio
For Asset A, Cov(A,P)=0.4×0.04+0.6×0.006=0.0196. For B, Cov(B,P)=0.4×0.006+0.6×0.01=0.0084. Each expression includes both the own variance and covariance with the other asset.
Divide by total standard deviation
Total standard deviation is approximately 0.11349009. Marginal contributions are approximately 0.17270231 for A and 0.07401527 for B. These derivatives are not yet weighted contributions; adding them does not produce portfolio volatility.
Apply weights and reconcile
| Asset | Capital weight | Weighted contribution (percentage points) | Risk share |
|---|---|---|---|
| A | 40% | 6.908092 | 60.869565% |
| B | 60% | 4.440916 | 39.130435% |
| Total | 100% | 11.349009 | 100% |
Retain precision until the final display
The displayed components can differ slightly from the displayed total after independent rounding. Check the sum using unrounded values. Risk shares describe this covariance record; they do not establish an investor’s desired risk budget.