Why do we use Active risk squared = active factor risk + active specific risk ?
Cant we just use active risk instead? Thanks
Why do we use Active risk squared = active factor risk + active specific risk ?
Cant we just use active risk instead? Thanks
Variances (with correlations of zero) add.
Standard deviations do not.
Whats the difference between active risk and active risk squared?
5% vs 5%2 = 0.25%