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Risk & Portfolio Management

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Risk & Portfolio Management

Diversification

Spreading investments across assets whose returns do not move together, so that the portfolio's volatility falls below the average of its…

Portfolio Variance = Sum over all pairs of (Weight i x Weight j x Covariance of i and j) qualitative Risk & Portfolio Management

Downside Risk

The dispersion of returns below a target level, ignoring variation above it.

Downside Deviation = square root of the average of squared shortfalls below the target return % Risk & Portfolio Management

Drawdown

The decline in a portfolio's value from a previous peak to a subsequent trough, expressed as a percentage.

Drawdown = (Peak Value - Current Value) / Peak Value x 100 %