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never [62]
3 years ago
5

The amount of risk that will remain in a portfolio depends on the degree to which the stocks are exposed to:______

Business
1 answer:
Ivan3 years ago
8 0

Answer:

Common risks.

Explanation:

Portfolio variance can be defined as the measurement of risk or dispersion of returns of a set of securities that makes up a portfolio fluctuate over a period of time.

Simply stated, portfolio variance is typically the total returns of the portfolio over a specific period of time.

In order to calculate the portfolio variance, the standard deviations of each security in the portfolio with their respective correlations security pair in the portfolio would be used. Portfolio variance is the square of standard deviation.

A two-asset portfolio with a standard deviation of zero can be formed when the assets have a correlation coefficient equal to negative one (-1) because this defines the efficiency frontier. In Economical portfolio theory, the efficient frontier is a group of optimal portfolios that offers an investor the highest expected return for a specific risk level or offers the lowest risk for a defined level of expected return.

The amount of risk that will remain in a portfolio depends on the degree to which the stocks are exposed to common risks.

A common risk can be defined as a type of risk that affects the entirety of a business firm or company and as such can't be diversified.

Hence, in order to eliminate some of the risk associated with a portfolio, business owners combine stocks in a portfolio and the amount of risk that will remain or eliminated in a portfolio depends on the degree to which the stocks are exposed to common risks.

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