Portfolio Management Reading 39: Portfolio Risk & return Part 1

[gjohnub]

EOC Question 9

Could someone tell me how to solve this in a simpler manner if possible, would greatly appreciate it.

Thanks

[S2000magician]

Their answer is as simple as possible. Anything else is more complicated.

Here’s the algebra:

σ²_port = w₁²σ₁² + w₂²σ₂² + 2_w_₁w₂σ₁σ₂ρ

σ²_port − w₁²σ₁² − w₂²σ₂² = 2_w_₁w₂σ₁σ₂ρ

ρ = (σ²_port − w₁²σ₁² − w₂²σ₂²) / (2_w_₁w₂σ₁σ₂)

[gjohnub]

Thank you, appreciate it. I was able to solve it dong the algebra.

[S2000magician]

So was I.