- #1

- 3

- 0

Can I compute as following? If so, what is the reason for adding the two deviations instead of mulitplying them considering the volalitity of an index and a currency are mutualy independent.

$$\sigma=\sqrt{(16^2)+(5^2)}$$

Thank you.

You are using an out of date browser. It may not display this or other websites correctly.

You should upgrade or use an alternative browser.

You should upgrade or use an alternative browser.

- I
- Thread starter egikm
- Start date

- #1

- 3

- 0

Can I compute as following? If so, what is the reason for adding the two deviations instead of mulitplying them considering the volalitity of an index and a currency are mutualy independent.

$$\sigma=\sqrt{(16^2)+(5^2)}$$

Thank you.

- #2

mfb

Mentor

- 35,359

- 11,682

What you can multiply are the actual courses, e.g. for deviations like (1+0.16)*(1+0.05) = 1+0.16+0.05+0.16*0.05. Neglect the last term, and you see that the deviations add.

If the deviations become large, neglecting the last term does not work any more.

- #3

- 3

- 0

Share: