Standard Deviation Of Portfolio Calculator

Work out standard deviation of portfolio instantly with clear inputs, formula shown and shareable results.

About Standard Deviation Of Portfolio Calculator

Portfolio risk is not the weighted average of the parts, because the assets do not move together. The correlation term is what creates the diversification benefit — the gap between the weighted average volatility and the actual portfolio volatility.

Formula

Two-asset variance

σ² = w_a²σ_a² + w_b²σ_b² + 2w_a w_b ρ σ_a σ_b

Worked example

With the default values below, Standard Deviation Of Portfolio Calculator returns Portfolio Volatility of 12.1497%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Weight In Asset Aaccepts 0–100 %: 60 %
Volatility Of Asset Aaccepts 0.1–100 %: 18 %
Volatility Of Asset Baccepts 0.1–100 %: 8 %
Correlation Between Themaccepts -1–1: 0.3

Results

Portfolio Volatility: 12.1497%
Portfolio Variance: 147.6160
Weighted Average Of The Two Volatilities: 14.0000%
Volatility Removed By Diversification: 1.8503%

Step by step

1Values used
2Two-asset variance
3Portfolio Volatility= 12.1497
4Portfolio Variance= 147.6160
5Weighted Average Of The Two Volatilities= 14.0000
6Volatility Removed By Diversification= 1.8503

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

What correlation gives the most benefit?

The lower the better; a negative correlation can reduce portfolio volatility below either asset on its own.

Do correlations hold up in a crisis?

Often not. Correlations tend towards one in severe sell-offs, exactly when diversification is needed most.