Using the spreadsheet from Problem 10 and the fact that Cola Co. and Gas Co. have a

Question:

Using the spreadsheet from Problem 10 and the fact that Cola Co. and Gas Co. have a correlation of 0.6083, calculate the volatility (standard deviation) of a portfolio that is 55% invested in Cola Co. stock and 45% invested in Gas Co. stock. Calculate the volatility by

a. Using Equation. 12.4, and

b. Calculating the monthly returns of the portfolio and computing its volatility directly.
c. How do your results compare?

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...