Portfolio variance is a measure of the riskiness of a portfolio. It can be measured using returns-based analysis by squaring the differences from the average return and dividing by the number of observations. It can also be measured using holdings-based analysis by taking the sum of the weights squared times each cell of the covariance matrix.
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Eve: And finally, take the square-root of
portfolio variance .
Liz: Yes, and don't forget to do the same to units of returns-squared.
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