ABSTRACT
The management of a portfolio, involving as is usually does, large amounts of money, is in itself a risk-prone operation. This chapter sets out to show how Excel can be used for this purpose. 'Risk' and 'uncertainty' are terms of some imprecision, depending on the context and the user. It considers two further statistics that are used to assess these uncertain variations and hence risk. The chapter reviews the Mean and the Standard Deviation which give them a measure of the average and the variation around this in relation to Simulation. It first examines Correlation and its application to our portfolio problem and later the use of Covariance. The Correlation Coefficient is a measure of the relationship between two variables. To establish the extent to which the stocks co-vary people can determine the correlation coefficient. The Covariance function provides a measure of how the variance of one data range is related to that of another data range.
