Understanding Standard Deviation in Portfolio Risk

Very Easy Portfolio Risk And Return Risk Measures

In the context of portfolio management, understanding various risk measures is essential for evaluating the risk associated with a portfolio of assets. One common measure used to quantify the risk of a portfolio is standard deviation. Which of the following statements accurately describes standard deviation as a risk measure?

Standard deviation measures the average return of a portfolio.

Standard deviation indicates the extent to which a portfolio’s returns can deviate from its average return.

Standard deviation is the only measure used to assess investment risk.

Hint

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