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Thread: Portfolio theory | Covariance & Correlation (a formula in my university paper)

  1. #1

    Portfolio theory | Covariance & Correlation (a formula in my university paper)

    Hey guys!

    There is a formula in my university paper for the covariance which i can find nowhere else and leads me to the wrong result and wrong correlation.

    With the other formula i get an acceptable result and a correlation between -1 and 1.

    Where is the problem? What am i doing wrong?

    Thank you very much!!
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  2. #2
    Elite Member stapel's Avatar
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    Cool

    Quote Originally Posted by PortoPorto View Post
    There is a formula in my university paper for the covariance which i can find nowhere else and leads me to the wrong result and wrong correlation.

    With the other formula i get an acceptable result and a correlation between -1 and 1.

    Where is the problem? What am i doing wrong?
    What's the formula? What are you doing? What have been your steps in doing that? Is there anything in the (too small to be legible) images that is necessary to the discussion?

    Please be complete. Thank you!

  3. #3
    Quote Originally Posted by stapel View Post
    What's the formula? What are you doing? What have been your steps in doing that? Is there anything in the (too small to be legible) images that is necessary to the discussion?

    Please be complete. Thank you!
    ****, I'm sorry! The board has reduced the size of the pictures!

    < link removed > I hope you can see the image now clearly!

    The Task is to calculate the variance - optimal portfolio and in this context, i have first to calculate the covariance.

    I have a formula for the covariance given, which I can find nowhere else:


    Given covariance formula: δAB =∑ xA*xB*P-μA*μB with this formula I get another result than with this formula:


    δAB=∑ P*(XA-μA)*(XB-μB)

    also, sesecond one is named everywhere else

    Am I just picking the wrong XA & XB in the first one?

    thank you!
    Last edited by mmm4444bot; 12-09-2017 at 02:41 AM. Reason: Link to "most viral images" removed

  4. #4
    Elite Member mmm4444bot's Avatar
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    Quote Originally Posted by PortoPorto View Post
    ****, I'm sorry! The board has reduced the size of the pictures!

    < link removed > I hope you can see the image now clearly!
    This forum needs to reduce full-size screen shots taken from large displays because they won't fit within the forum's thread column without reduction. Thumbnails are displayed, for larger images. Clicking the thumbnail provides an enlarged version which is itself clickable, to zoom further, if the original graphic file has sufficient resolution.

    Your screen shot has low resolution.

    Best results are obtained by breaking a large screen shot into sections, cropping off irrelevant stuff around margins, and uploading them separately. The higher a graphic file's resolution, the better it displays.

    Additionally, please do not post URLs to sites that add random images to yours. We have no control over such "viral images", some of which violate forum policy. Please read the forum guidelines. Thanks.
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