Question by newmenow72: Calculating unsystematic risk with market correlation and standard deviation?
A portfolio has a correlation with the market of .8 and a standard deviation of 20%. How much unsystematic risk is there in the portfolio?
Answer
Answer by StopSpendingYou need the variance of the market portfolio to answer this question since:
variance of stock = correlation * vol of stock * vol of market + variance of unsystematic risk.
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