Calculate the volatility (risk) of a portfolio based on asset weights and their covariance matrix.
About Portfolio Volatility
Portfolio volatility measures the risk of a portfolio by calculating the standard deviation of its returns. It accounts for the weights of each asset and their covariances, which reflect how asset returns move together. This tool computes volatility as the square root of the portfolio variance (w^T * Cov * w), where w is the weight vector and Cov is the covariance matrix.
Example: For two assets with weights 40% (0.4) and 60% (0.6), and a covariance matrix [[0.04, 0.02], [0.02, 0.03]], the volatility is calculated based on the weighted covariance.
Input Fields
Provide the following details to calculate your portfolio’s volatility:
Number of Assets: The number of assets in your portfolio (1–10).
Asset Weights: The proportion of the portfolio allocated to each asset (e.g., 0.4 for 40%). Weights must sum to 1.
Covariance Matrix: The covariance between asset returns. For N assets, provide a symmetric N×N matrix where each element is the covariance between two assets (e.g., 0.04 for variance, 0.02 for covariance).
