Thank you. Though Excel has the "covariance" command in data analysis which creates a var-cov matrix from the table of profit/loss with one click. With three assets maybe doing manually is ok. But I have 22 assets and I am incredibly grateful for that covariance command
Professor its beautifully explained and I really appreciate your efforts in posting this helpful content. I had one question in the Var- covariance table have you misplaced the sign of standard deviation where you should be putting the sign of Variance.
If we had daily returns of assets. Do we calculate daily variance and sd, then rescale it to annual varaince and sd. Then use these in the portfolio variance calculation ?
Explained it so much better than my professor, Thank you so much!
Glad it helped, thanks for the positive feedback.
Thank you. Though Excel has the "covariance" command in data analysis which creates a var-cov matrix from the table of profit/loss with one click. With three assets maybe doing manually is ok. But I have 22 assets and I am incredibly grateful for that covariance command
I'll have to check that out, didn't know that you could do the varcovar there. Thanks!
hi! i have a question.
why sometimes people want arithmetric return of say 5 HPR sometimes they want geometric? (twr vs mwr)
Professor its beautifully explained and I really appreciate your efforts in posting this helpful content. I had one question in the Var- covariance table have you misplaced the sign of standard deviation where you should be putting the sign of Variance.
Thanks for your comment, could you let me know the time in the video where I made the error?
Thank dear professor I really needed that
Thank you sir, is this for portfolio optimization? What is rhe purpose of this exercise?
Yes, you could use Solver to vary the weights. Check out my efficient frontier video.
If we had daily returns of assets. Do we calculate daily variance and sd, then rescale it to annual varaince and sd. Then use these in the portfolio variance calculation ?
I would just keep everything daily. No need to change units. Of course your daily return will be smaller.
very helpful thank you!
You're welcome, glad to hear it helped!
how to import data into excel?
Finance.yahoo.com or bulk stock downloader
thank you so much
glad it was of use!
whats the standard deviation
That's the portfolio standard deviation because I took the square root. If you don't take the square root its the variance.
helped!
For those with Lambda:
=LET(
RetAverage, BYCOL(Return_Array, LAMBDA(x, AVERAGE(x))),
VarCov, MMULT(TRANSPOSE(Return_Array - RetAverage), Return_Array - RetAverage) /
(ROWS(Return_Array) - 1),
StDev, SQRT(MMULT(Asset_Weights, MMULT(VarCov, TRANSPOSE(Asset_Weights)))),
Return, SUMPRODUCT(Asset_Weights, RetAverage),
Sharpe_Ratio, (Return - Risk_Free_Rate) / StDev,
IFS(Type = 1, Return, Type = 2, StDev, Type = 3, Sharpe_Ratio)
thanks, I also wrote some Lambdas for this in another TH-cam: th-cam.com/video/7CIkj9NIS0s/w-d-xo.html
@@DavidJohnk Cool, thank you.