Assume that OGDCL stock has following details 2. = 20%, 82 = 19%, W, = 0.6, 11.2 = +1 a. Calculate Risk of OGDCL. b. Is portfolio a better approach to minimize risk? Comment based on your calculations.

Part A:

Portfolio SD:

It is nothing but volataility of Portfolio. It is calculated based on three factors. They are
a. weights of Individual assets in portfolio
b. Volatality of individual assets in portfolio
c. Correlation betwen individual assets in portfolio.
If correlation = +1, portfolio SD is weighted avg of individual Asset's SD in portfolio. We can't reduce the SD through diversification.
If Correlation = -1, we casn reduce the SD to Sero, by investing at propoer weights.
If correlation > -1 but <1, We can reduce the SD, n=but it will not become Zero.

Wa = Weight of A
Wb = Weigh of B
SDa = SD of A
SDb = SD of B

Portfolio SD = SQRT[((Wa*SDa)^2)+((Wb*SDb)^2)+2*(wa*SDa)*(Wb*SDb)*r(A,B)]
=SQRT[((0.6*0.2)^2)+((0.4*0.19)^2)+2*(0.6*0.2)*(0.4*0.19)*1]
=SQRT[((0.12)^2)+((0.076)^2)+2*(0.12)*(0.076)*1]
=SQRT[0.0384]
= 0.196
= I.e 19.6 %

Part B:

If correlation = +1, portfolio SD is weighted avg of individual Asset's SD in portfolio. We can't reduce the SD through diversification.
If Correlation = -1, we casn reduce the SD to Sero, by investing at propoer weights.
If correlation > -1 but <1, We can reduce the SD, n=but it will not become Zero.

In the given case r is "+1", we can't minimise the risk.