Stock Market Volatility. Do you know your Portfolio Volatility?

Calculating the Volatility of a Stock/ETF Portfolio is not quick and easy to do unless you have built a spreadsheet or have a software application designed to do this. When calculating Portfolio Volatility you need to use the underlying securities, portfolio weights, and a Covariance matrix generated from all the underlying securities.  

The most important quality of portfolio variance is that its value is a weighted combination of the individual variances of each of the assets adjusted by their covariances.This means that the overall portfolio variance is lower than a simple weighted average of the individual variances of the stocks in the portfolio. Once you have the Variance take the SQRT of it and you now have the Portfolio Volatility.

The attached screen image from Zoonova.com shows Portfolio output where the Variance and Volatility are calculated using the underlying Covariance matrix. All Variance and Volatility calculations for any Portfolio use a Covariance matrix. Using the calculated Volatility you can then calculate Sharpe, Conditional Sharpe, and the Modigliani Ratio (M-2).