Two-Asset Portfolio Volatility Calculator
Enter two assets' annual volatility, their correlation and asset A's weight to get the portfolio volatility and the risk reduction from diversification.
Results
Fill in the inputs and click Calculate.
- Portfolio Volatility
- –
- Weighted-Average Vol
- –
- Diversification Gain
- –
- Covariance (σA·σB·ρ)
- –
Risk disclaimer
Historical correlation and volatility do not guarantee the future; use this for diversification math, not return forecasts.
Why portfolio volatility?
Portfolio risk is not the sum of two assets' risks: lower correlation shrinks portfolio volatility relative to the weighted average.
Negative correlation can even make the portfolio less volatile than either asset — the core of diversification.
How to use
- Enter asset A's weight (%); asset B takes the rest.
- Enter both assets' annualized volatility (%).
- Enter the correlation (-1 to 1, default 0).
- Click Calculate for portfolio volatility and diversification gain.
Formula
- Portfolio variance = wA²σA² + wB²σB² + 2·wA·wB·σA·σB·ρ
- Portfolio volatility = √variance
- Diversification gain = weighted-average vol − portfolio vol
Example
A 50%, σA 20%, σB 10%, ρ = 0.5 → portfolio volatility ≈ 13.23%, below the 15% weighted average.
At ρ = 0 it falls to ≈ 11.18% — a larger diversification gain.
FAQ
Is this a forecast?
No. Fill volatility and correlation from history or your venue; results describe math for those inputs.
Wrong weight?
A is 0–100 and B fills the rest; set A to 100 or 0 to inspect either side.