Hi Krishdear
I think these are the proportions, x1 and x2, invested in each of the two funds (technology and growth).
Let the portfolio return be:
R(p) = x(1) R(1) + x(2) R(2)
where R(1) and R(2) are the returns on the two funds respectively.
The variance on the portfolio is:
var(p) = x1^2 var(1) + x2^2 var(2) + 2 x1 x2 sigma(1) sigma (2) rho(1,2)
where:
x1 = 15/(15 - 7.5) = 2 = 200%
x2 = -7.5/(15 - 7.5) = -1 = -100%
rho(1,2) = -0.25
sigma(1) = 0.04
sigma(2) = 0.02
Does this help?
Anna
Last edited: Sep 30, 2020
