From the course: Excel for Investment Professionals

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Computing standard deviation and variance of an asset

Computing standard deviation and variance of an asset - Microsoft Excel Tutorial

From the course: Excel for Investment Professionals

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Computing standard deviation and variance of an asset

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- [Instructor] In addition to calculating your return statistics, as an investor you'll probably need to go through and calculate different metrics for risk. There's two different ways that you might calculate risk based on a portfolio. Let me show you what I'm talking about. I'm in the 03 04 Begin Excel file. Now, we have two different ways to calculate risk in a particular portfolio. Let's focus first on this area in blue over here on the left. We've got a two asset portfolio. Asset number one and asset number two and I've gone through and listed our returns on a monthly basis for each of these two assets. We can use the variance formula in Excel to go through and compute our variance for each of these. Now what is variance you might ask? Well variance is really a metric that establishes or computes how spread out our returns are. So if a stock is up 30% one month and down 30% the next, it will have a high variance. A stock that is consistently returning about the same amount every…

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