Standard Deviation as Risk
Overview
One common measure of risk, pioneered by Harry Markowitz,
is the variance (or equivalently the standard deviation) of returns. (see
variance
for information about the statistical measure
of variance, standard deviation and covariance)
For an individual asset, the variance can be calculated using the standard
volatility
tools of
time series.
{% Risk = Standard \; Deviation(returns) %}
Portfolio Standard Deviation
Portfolio Standard Deviation -
when assets are combined into a portfolio, the standard deviation measure of risk can be applied to the portfolio as a whole,
however, the calculations can get more complex.
