Variance-covariance matrix
Instructions: You are given the following data below. Calculate in YELLOW
- Calculate mean, variance, standard deviation, covariance, correlation
- Create a chart of the mean and standard deviation of combinations of the portfolios.
- Add the individual asset returns to the chart—are the two portfolios on the efficient frontier?
Variance-covariance matrix | Means | ||||
0.40 | 0.03 | -0.04 | 10% | ||
0.03 | 0.50 | 0.05 | 15% | ||
-0.07 | 0.07 | 0.70 | 12% | ||
Portfolio1 | Portfolio2 | ||||
Asset1 | 20% | 10% | |||
Asset2 | 30% | 50% | |||
Asset3 | 50% | 40% |