CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. Note that covariance and … We are here only given the latest market value, and there are no returns given directly. This indicates that the overall variance is lesser than a simple weighted average of the individual variances of each stock in the portfolio. Stock A has a market value of \$10,000 (1,000 * \$10) and Stock B has a market value of \$1,200 (\$12 * 100). HPR = Income + (End of Period Value - Initial Value) ÷ Initial Value This return/yield is a useful tool to compare returns on investments held for different periods of time. And a positive covariance indicates that two assets are moving sequentially while in a negative covariance two assets move in opposite directions. It is crucial to understand the concept of the portfolio’s expected return formula as the same will be used by those investors so that they can anticipate the gain or the loss that can happen on the funds that are invested by them. Calculate the Portfolio Return. Formula for Portfolio Variance. Expected return formula is a formula which an investor can decide whether he can further invest into an asset to obtain the given probable returns. Portfolios aim is to deliver a return on the basis of prespecified investment strategy to meet the investment objective, as well as the risk tolerance of the type of investors targeted by the portfolio. You are required to earn a portfolio return. Hence the portfolio return earned by JP Morgan is 21.57%. Note: For detailed Calculations, please refer to the excel template. Portfolio Return = 16.8% Here we discuss How to Calculate Portfolio Return along with practical examples. This has been a guide to Portfolio Return Formula. The motive of the formation of a portfolio is to reduce the overall risk and volatility of the investment and continuously striving for attaining the better positive rate of return. And their respective weight of distributions are 60% and 40%. The term “portfolio variance” refers to a statistical value of modern investment theory that helps in the measurement of the dispersion of average returns of a portfolio from its mean. In short, it determines the total risk of the portfolio. This has been a guide to Portfolio Variance Formula. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy, Download Portfolio Return Formula Excel Template, Black Friday Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) Learn More, You can download this Portfolio Return Formula Excel Template here –, 250+ Online Courses | 1000+ Hours | Verifiable Certificates | Lifetime Access, Finance for Non Finance Managers Course (7 Courses), Investment Banking Course(117 Courses, 25+ Projects), Financial Modeling Course (3 Courses, 14 Projects), correlation coefficient is majorly used to determine. Here we discuss how to calculate the return of the total portfolio using its formula along with examples and a downloadable excel template. The expected return can be calculated with a product of potential outcomes (i.e., returns which is represented by r in below) by the weights of each asset in the portfolio (i.e., represented by w), and after that calculating the sum of those results. Weight of each investment is calculated as, So, the overall outcome of the expected return is 12.8%. To calculate a portfolio's expected return, an investor needs to calculate the expected return of each of its holdings, as well as the overall weight of each holding.