Before this, we’ve spoken on variance and covariance to see how risky your assets are. Of course, that won’t be enough, which is why we’ll now look into the variance-covariance matrix — a step away from looking into the variance-covariance correlation matrix, which is the thing that will tell you how the stocks in your portfolio correlate with one another.
Honestly, the steps are long, and it’s okay if you don’t feel like learning how to do it from scratch. You can skip all of these lessons and head straight to this Google sheet file, which allows you to reach the portfolio correlation step, which is a step after this one, right away. All you need to do is fill in the ticker name for the stocks that you have and its weight. All credit for the sheet file goes to John Mihalik who published it on his Medium page.
By the way, the weight is how many percent of your portfolio the stock constitutes. For example, the total money you allocated to invest is $1,000. Out of that $1,000, $100 is invested in Stock A. So, Stock A’s weight is 10%.
These are some of the things that is included in the Google sheet file: