Portfolio Standard Deviation Calculator
Calculate your portfolio's volatility from asset weights and individual standard deviations. Understand diversification and total risk at a glance.
Portfolio Assets
What is Portfolio Standard Deviation?
Portfolio standard deviation measures the total volatility (risk) of your portfolio based on the volatilities of each asset and how they move together (correlation). A lower portfolio standard deviation means less overall risk; diversification typically reduces it when assets are not perfectly correlated.
How to Use This Calculator
- Add assets: Enter each holding's name, market value, and annual standard deviation (volatility). You can get historical volatility from many screeners or our Stock Standard Deviation Calculator.
- Set correlation: Use the average correlation between assets (0–1). Stocks often correlate 0.3–0.6; mixed stock/bond portfolios are lower (e.g. 0.1–0.3).
- Read the result: The calculator shows your portfolio's annual standard deviation (%). Use it to compare risk across portfolios or to size positions.
Why Portfolio Standard Deviation Matters
Knowing your portfolio standard deviation helps you align risk with your goals, compare strategies (e.g. vs. Sharpe ratio), and understand the effect of adding or removing positions. Combined with expected return, it is the basis for risk-adjusted metrics like the Sharpe ratio.
Frequently Asked Questions
What is portfolio standard deviation?
Portfolio standard deviation measures the total volatility (risk) of your portfolio based on the volatilities of each asset and how they move together (correlation). A lower portfolio standard deviation means less overall risk; diversification typically reduces it when assets are not perfectly correlated.
How is portfolio standard deviation calculated?
Portfolio variance is computed from asset weights, individual standard deviations, and correlations: Var = (1−ρ) Σ wᵢ²σᵢ² + ρ(Σ wᵢσᵢ)² when using a single average correlation ρ. Portfolio standard deviation is the square root of this variance, usually expressed as an annual percentage.
What correlation should I use between assets?
Use an average correlation between 0 and 1. Stocks in the same sector often correlate 0.4–0.7; diversified equity portfolios 0.3–0.6; mixed stock/bond portfolios 0.1–0.3. Higher correlation means less diversification benefit and higher portfolio volatility.
How do I get each asset’s standard deviation?
You can use historical returns to compute standard deviation (e.g. annualized daily return volatility). Many screeners and our Stock Standard Deviation Calculator provide historical volatility. Option-implied volatility is another source for forward-looking estimates.
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