Portfolio Risk

(^2222)
1 2 12 1 2
1 2 12
1 2 12 1 2
12 12 1 2 12
x ó
x x ñ ó ó
Stock 2 x x ó
x x ñ ó ó
Stock 1 x ó x x ó
Stock 1 Stock 2

=
The variance of a two stock portfolio is the sum of these
four boxes: