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The standard deviation of a portfolio: Is a weighted average of the standard deviations of the...

The standard deviation of a portfolio:
Is a weighted average of the standard deviations of the individual securities held in the portfolio.
Can never be less than the standard deviation of the most risky security in the portfolio.
Must be equal to or greater than the lowest standard deviation of any single security held in the portfolio.
Is an arithmetic average of the standard deviations of the individual securities which comprise the portfolio.
Can be less than the standard deviation of the least risky security in the portfolio.
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Answer #1

The standard deviation of a portfolio:

correct answer : Can be less than the standard deviation of the least risky security in the portfolio.

PORTFOLIO SD =sqrt [ (wA)^2*(sd(A))^2 + (wB)^2*(sd(B))^2 + 2 wA*wB*(sd(A))(*sd(B))*rAB]

The above formula states that it is not weighted average and it is also not arithmetic average.

secondly, if correlation is negative between the 2 stocks then portfolio may have risk lower than the least risky asset in portfolio.

so last answer is the correct answer

still any doubts, feel free to ask. Thumbs up please
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