# Portfolio Variance

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## Definition of 'Portfolio Variance'

In finance, portfolio variance is a measure of the dispersion of returns of a portfolio. It is the expected value of the squared difference between the portfolio return and the expected portfolio return.

Portfolio variance is a measure of the risk of a portfolio. The higher the portfolio variance, the riskier the portfolio.

Portfolio variance can be calculated using the following formula:

```

sp^2 = ?(ri - r)^2 * wi

```

where:

* sp^2 is the portfolio variance

* ri is the return of asset i

* r is the expected return of the portfolio

* wi is the weight of asset i in the portfolio

Portfolio variance can be used to compare the risk of different portfolios. It can also be used to make decisions about how to invest a portfolio.

For example, an investor who is risk-averse may choose to invest in a portfolio with a lower portfolio variance. An investor who is willing to take on more risk may choose to invest in a portfolio with a higher portfolio variance.

Portfolio variance is an important concept in portfolio management. It is a measure of the risk of a portfolio and can be used to make decisions about how to invest a portfolio.

Portfolio variance is a measure of the risk of a portfolio. The higher the portfolio variance, the riskier the portfolio.

Portfolio variance can be calculated using the following formula:

```

sp^2 = ?(ri - r)^2 * wi

```

where:

* sp^2 is the portfolio variance

* ri is the return of asset i

* r is the expected return of the portfolio

* wi is the weight of asset i in the portfolio

Portfolio variance can be used to compare the risk of different portfolios. It can also be used to make decisions about how to invest a portfolio.

For example, an investor who is risk-averse may choose to invest in a portfolio with a lower portfolio variance. An investor who is willing to take on more risk may choose to invest in a portfolio with a higher portfolio variance.

Portfolio variance is an important concept in portfolio management. It is a measure of the risk of a portfolio and can be used to make decisions about how to invest a portfolio.

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Copyright © 2004-2023, MyPivots. All rights reserved.