Covariance and portfolio risk?

If you have two stocks that produce a covariance of 43.25; how is portfolio risk artificial by adding these?

How can the average human being short crude grease?

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Answers:   Covariance is a passageway to tell how closely two subjective variables are related. So, for example, stock A is closely related to Stock B, knowing about stock A can give support to you predict what will happen to stock B.

I don't know anything something like the data anyone used in your travel case but since 43.25 is greater than zero at hand is some relationship between the two stocks. The reason that knowing this will assistance with portfolio risk is because you can, contained by a way, guess what is going to develop to one of the stocks based on the other, effectively lowering some of your risk. If you have a covariance of 0 you would not be able to do this and, within theory, your risk would be better because there is a greater level of unknown.

Hope this helps, upright luck!

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