Hey anyone has any idea about how to calculate variance/covariance/standard deviation really quick with BAII Plus? I know how to do with using equation but I find it extremely time consuming for some reason…>< I have tried couple times with the Stats/Data function and input two sets of data as X1/Y1 etc etc…but the figures it gave me didn’t seem to match any of the answers…for example, how do you calculate the variance of this question using your calculator? Probability 0.5 0.3 0.2 Stock A 25% 10% -25% Stock B 1% -5% 35% Expected return and Variance of the portfolio? Weight is allocated 50% to each stock. Thanks future CFAs…oops violation of the standard lol
anyone?
Covariance and portfolio variance cannot be calculated using the TI BAII (plus or professional). You can only calculate single variable standard deviation, thus variance. I would be happy to be proven wrong 
You can effectively calculate covariance using BAII plus, because it will calculate s.d. of X and Y, and r (correlation coefficient), so I think thats the quickest way to get to the covariance. But regarding portfolio variance, I think you’re right, I’m not sure if its possible on the BAIIplus.
Oh yes, what a happy surprise, there is the r. I should have read my manual X-) I’ll see whats faster for me later today.
really…but I dont think you can incorporate probability into the covariance calculation tho??? right now it takes me about 5 minutes to solve such variance question, I gotta find out E(A), E(B) variance for A & B, then Cov(A,B) and then use the formula to get Portfolio variance, which is about 5 minutes IF, I punched/calc right lol, should I just skip it then…
I would skip it, or keep it until the end.
Variance = E(X^2) - E(X)^2 Covariance = E(XY) - E(X)E(Y) so in this case, Probability 0.5 0.3 0.2 Stock A 25% 10% -25% Stock B 1% -5% 35% I would calculate covariance as following: 0.5*.25*.01-0.3*.1*.05 - 0.2*.25*.35 - (0.5*.25+.3*.1-.2*.25)*(0.01*.5-0.3*.05+0.2*0.35) I can do the calculation within 15 secs if I entered everything correctly but it’s better to calculate E(XY), E(X) and E(Y) separately.
what is the y01 in the 2nd+7 function? i thought at first x01 is the variable and y01 is the frequency…am i wrong?
Y is used if you’re doing a simple regression I believe, but you can use it to find the CORR (therefore COV) between two sets of variables. Doesn’t work with probability distributions though :\
any idea why the results for std dev are not equal to what theyd be if u do it by hand–theres a slight rounding error
hey nice, i didn’t know about this equation to calculate the Variance/Covariance…it seems much faster like you suggested…even though I have NO IDEA why they give the same answers lol
QBank Question ID#: 5439 An analyst gathered the following data for Stock A and Stock B: Time Period Stock A Returns Stock B Returns 1 10% 15% 2 6% 9% 3 8% 12% What is the covariance for this portfolio? A) 2. B) 3. C) 12. D) 6. Correct Answer D) 6. Can someone try this on their BAII Plus? When I do it using the DATA/STAT function, I get a covariance of 4. But if I calculate it by hand I get 6. What am I doing wrong with my calc? Please help. Thank you.
I got 6. Using: r = 1 Sy = 3 Sx = 2 COV = R*Sy*Sx
bpul, any chance you could list the steps you took to get that? (i know you probably have lots of free time on your hands today)
Thank you. I’m a fool. I was using the Pop’n Std Deviations for my calculation. Be careful everyone when using the STAT function. Sx = Sample Std Deviation (sigma)x = Population Std Deviation
2nd DATA X1 10% Y1 15% X2 6% Y2 9% X3 8% Y3 12% 2nd STAT Scroll Through Values: r = Correlation Sx = Sample Std Deviaiton X Sy = Sample Std Deviation Y Covariance = r*Sx*Sy = 6
the show NY Wrote: ------------------------------------------------------- > bpul, > > any chance you could list the steps you took to > get that? (i know you probably have lots of free > time on your hands today) Sure, no problem. Hit 2nd DATA on the calculator, you’ll see a screen that says X1. This is where you’ll enter the data. X01 = 10 Y01 = 15 X02 = 6 Y02 = 9 X03 = 8 Y03 = 12 Then hit 2nd STAT. Now you should get something that says LIN. Now this is the tricky part. Notice that the analyst gathered the data, and there are no references to population parameters. We’re gonna be looking for the sample standard deviation here. Hit the down arrow until you see Sx. That’s the sample standard deviation for the 1st column of data. Write this on your scratch paper. Keep scrolling down and you’ll see Sy, which is the standard deviation for the 2nd column. Record this and hit the down arrow until you see r, which is the correlation efficient. Multiply these 3 and you have the covariance.
how do you know what r is? is it always 1?
r is supposed to be ro, the sign for correlation. Correlation is a standardised form of Covariance. It’s values range from -1 to +1. For this particular example, they are perfectly correlated. Thus the Correlation (r, ro) is +1. For other examples, r will have a different value.