Which portfolio

General
1

Hi, why the answer is googl and aapl?

Course Name: Quantitative Portfolio Management, Section No: 3, Unit No: 3, Unit type: Quiz

2

Hi Red Red,

Think from formula perspective:

σ²(Portfolio) = a² × σ_X² + b² × σ_Y² + 2ab × Cov(X,Y)

This third term — 2ab · Cov(X,Y) — controls how assets interact.

For example:

  • If Cov(X,Y) is positive, the third term adds to the variance.
  • If Cov(X,Y) is negative, it subtracts from the total variance.
  • If assets move in opposite directions, they help stabilize the portfolio.

Thanks,
Ajay