Portfolio Risk and Return Calculator
Estimate a two-asset portfolio's expected return and volatility from weights and correlation.
Result
Review or adjust your inputs, then calculate to see your results and interpretation.
Understand this calculation
Returns add by weight, while risk includes covariance. Correlation below one can reduce volatility below weighted standalone risk; diversification does not guarantee a profit.
See calculation method and assumptions
Formula
Portfolio Risk and Return
Variables, rates and periods
- Rp
- Expected portfolio return.
- wA, wB
- Nonnegative asset weights summing to 100%.
- RA, RB
- Asset returns measured over the same period.
- σA, σB
- Nonnegative same-period return standard deviations.
- ρ
- Return correlation, between −1 and 1.
- σp², σp
- Portfolio variance and its square root (standard deviation); no automatic annualization.
Keep observations consistent
- Covariance equals correlation times both standard deviations.
- Estimate it from aligned observations with matching frequency and return definitions, accounting for missing values.
Understand the units
- Returns and volatility are displayed as percentages;
- variance and covariance use squared decimal returns.
- Annualizing risk requires additional time-independence and scaling assumptions.
Estimate a two-asset portfolio's expected return and volatility from weights and correlation.
Worked example
- Use the same observation horizon for both assets' returns and standard deviations.
- Enter weights 60% and 40%, totaling 100%.
- Return is 60% × 8% + 40% × 4% = 6.4%; variance including covariance is 0.01792.
Frequently asked questions
What is the correlation range?
It ranges from −1 to 1. One is perfect positive correlation, zero means no linear correlation, and minus one is perfect negative correlation; zero does not imply independence.
Can I short or use leverage?
This tool requires long-only weights totaling 100%. It does not model negative weights, leverage, dynamic rebalancing, transaction costs, or higher distribution moments.
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