How differences in correlation produce different minimum variance portfolio weightings

Linked below, please find a spreadsheet which showcases how differences in correlation between two risky assets result in different minimum variance portfolio weightings. While we manually performed a similar analysis on the whiteboard in class yesterday, it is also helpful to see this analysis modeled in Excel. Besides determining minimum variance portfolio weightings under different correlation assumptions, the spreadsheet also calculates expected portfolio returns and risks. Furthermore, it decomposes portfolio risks into their component parts – risks related to the variances of the assets which comprise the portfolio, as well as risks which originate from covariance.

4335 mvp.xlsx

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