combined std dev of corner portfolios

both CFAI & Schweser just do a straight weighted average of the std devs of two corner ports to come up with a combined number. My understanding was that to determine combined std dev we need to do the whole calculation: square root of weightA^2*stddevA^2 + weightB^2*stddevB^2 + 2*Corr etc… what am i missing here?

You not missing anything chief. Ignore the last part of the regular equation.

When the correlations between the portfolios is 1 , the std deviation of 2 portfolios becomes their weighted avg (use it in the formula n check ) … Anyway when the correlation is 1 , the standard deviation is the highest possible value (use lower values n check ) … N since std deviation measures risk , this sd represents the max possible risk … A conservative approach ( coz if risk is lower than u say no ones gonna complain right ? Plus its easier to calculate so why bother :slight_smile: )