On this page
Keep the input record beside the calculation
The hypothetical assets use the same return period and definition. Capital weights are 0.4 and 0.6; standard deviations are 0.2 and 0.1. The assumed correlation is 0.3. No expected return or named investment is supplied.
Convert correlation first
Covariance is 0.3×0.2×0.1=0.006. The two own variance terms are 0.4²×0.2²=0.0064 and 0.6²×0.1²=0.0036. They would be the whole calculation only if covariance were zero.
Include both cross products
| Term | Decimal variance | Percentage points² |
|---|---|---|
| A own term | 0.0064 | 64 |
| B own term | 0.0036 | 36 |
| Cross term | 0.00288 | 28.8 |
| Sum | 0.01288 | 128.8 |
Interpret the result
The square root is approximately 0.11349009, or 11.349009%. The 128.8 squared-unit figure is not a percentage volatility. Reversing the square-root and unit conversions reproduces the input variance.