Two-Asset Portfolio Risk Calculator
See how weights, volatility and correlation set the return and risk of a two-asset portfolio. Educational only, not trading or investment advice.
Quick answer
Two-asset portfolio risk: variance = wA^2 sA^2 + wB^2 sB^2 + 2 wA wB rho sA sB, and standard deviation is its square root. Expected return is the weighted average of the two returns. Lower correlation reduces risk.
Two-Asset Portfolio Risk Calculator
Asset B gets the remainder.
Portfolio Expected Return
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Portfolio Std Deviation
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Weighted-Average Std Dev
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Diversification Benefit
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Min-Variance Weights (A / B)
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Min-Variance Std Dev
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Min-Variance Return
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Educational only. This is not trading or investment advice. Inputs are assumptions, not forecasts.
Return and Risk by Weight
| Weight A | Weight B | Expected return | Std deviation |
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Assumptions & method
- Portfolio return = wA·rA + wB·rB, with wB = 1 − wA.
- Portfolio variance = wA²σA² + wB²σB² + 2·wA·wB·ρ·σA·σB; standard deviation = √variance. Diversification benefit = weighted-average σ − portfolio σ.
- Minimum variance weight in A = (σB² − ρσAσB) ÷ (σA² + σB² − 2ρσAσB), limited to 0–100% (long-only, no leverage).
- Returns and standard deviations are annual, in percent, and assumed constant. Correlation is assumed stable, which often fails in market stress.
- Not included: costs, taxes, rebalancing, or estimation error in the inputs. Results are illustrative and not trading or investment advice.
Results are estimates based on the figures you enter. They are not guarantees and not financial advice.
Why diversification lowers risk
Combining two assets does not average their risks. The portfolio's expected return is the weighted average of the two returns, but its standard deviation depends on both volatilities and on how the assets move together. If they are not perfectly correlated, some of each asset's swings offset the other's, so the portfolio is less volatile than the weighted average of the two. This calculator shows the return and risk for your weights, the diversification benefit, the minimum variance mix, and a curve of every 0–100% weighting. The inputs are assumptions, so treat the output as an illustration.