Work out standard deviation of portfolio instantly with clear inputs, formula shown and shareable results.
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.
Two-asset variance
σ² = w_a²σ_a² + w_b²σ_b² + 2w_a w_b ρ σ_a σ_b
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.
The lower the better; a negative correlation can reduce portfolio volatility below either asset on its own.
Often not. Correlations tend towards one in severe sell-offs, exactly when diversification is needed most.