I ran across this formula for calculating the covariance between portfolios when you don’t know the correlation: Cov i,j= Bi*Bj*Variance of the market where: Bi= Beta between the market and portfolio I Bj= Beta between the market and portfolio J Cov I,j= covariance between portfolio I and J Does anyone know where in the CFA notes they talk about this? Has anyone seen this before? Thanks.
use search, it’s been discussed before.
This is something that is in L2 now brought down from L3 last year I believe. In L2’s curriculum it’s under the Market Model. “Market Model Predictions or Expected Returns, Variances, and Covariance.” In L2 the market model adds 3 equations. I was searching for a post on this and the L3 post came up. Maybe this will help you find it.