Copyright (c) Christopher Makler / econgraphs.org

Correlation and Diversification

Each blue dot in the left two graphs represents the returns to two assets for one state of the world.

The green dots in the center graph represents the return to a weighted portfolio of those assets in each state of the world.


\text{Correlation }(\rho): {{ params.rho > 0 ? '+' : '' }}{{ params.rho | number:2 }}

Drag the portfolio left and right to change weights:

Drag the means and standard deviations of the assets: